Dollar now sells for N220 at BDCs

The naira on Thursday crashed further against the United States dollar from 215 to 220 at the Bureau de Change segment of the foreign exchange market, following the closure of the Retail Dutch Auction System and Wholesale Dutch Auction System window by the Central Bank of Nigeria.

The naira also weakened to 199 to the dollar at the interbank market, compared to 197 on Wednesday.

The CBN had on Wednesday said all demands for foreign exchange should be channelled to the interbank market, adding that only genuine demands for foreign exchange would be met.

The President of the Association of Bureau de Change of Nigeria, Mr. Aminu Gwadabe, told our correspondent in a telephone interview on Thursday that the closure of the RDAS could further affect access to foreign exchange by the BDC segment of the market.

“The dollar has gone to 220 at the close of the market today from 215.5 yesterday (Wednesday). That is the rate you can buy now, that is even if you see it. You might not even see it at 220 because the supply is not much.”

“Last week, we bought at the interbank at N203, N204. As of yesterday (Wednesday), the rate at the BDC was N215.5.

“By tomorrow (Friday), we are likely going to see continuous volatility in the market except the CBN, as promised, continues to intervene at the interbank market.”

He added, “Before the closure of the RDAS, the CBN had stopped selling its money to the BDCs through the RDAS for the past three weeks or so. We have been accessing foreign exchange through the interbank. Technically, what they are saying is that it is going to be a one-rate system.”

There are over 2,500 BDC operators in the country. At the BDC, the process of buying dollars is less rigorous but the operators usually sell in small lots, compared with the interbank market, which can transact over $100m a day.

“There is going to be a lot of competition in the interbank market because everybody will be going there.

“So, to some extent, except the CBN is going to intervene heavily in the market as it said, we will find that the sources of foreign exchange to the BDCs will be narrowed again and the rate at which the BDCs sell will definitely go higher,” said Gwadabe.

A fixed income and currency analyst at Ecobank, Mr. Olukunle Ezun, said with the wide margin between the RDAS and interbank market rates, the CBN had been subsidising the naira, which was not the best practice because it gave room for round-tripping and speculation.

Ezun said, “This one is more like implicit devaluation because the CBN has not made the pronouncement. But if the CBN is selling at N196 or N197, that is devaluation without saying it