Despite last week’s raid and arrest of some licensed currency dealers who were said to be selling foreign exchange (FX) above the prescribed limit, the naira appreciated on both the interbank and parallel segments of the market.
Precisely, on the interbank FX market, the spot rate of the naira climbed N1.45 to close at N304.75 to the dollar last Friday, stronger than the N306.50 to the dollar the previous day.
Also, on the parallel market, the naira appreciated by N5 to trade at N455 to the dollar at the weekend, compared with the N460 to the dollar the day before.
But on the Bureau De Change (BDC) segment, the nation’s currency depreciated to N405 to the dollar, from about N400.
It was reported that security operatives from the DSS had raided the offices of some BDCs in Lagos and Abuja and arrested dealers for selling above the stipulated exchange rate.
Prior to the action of the security operatives, it was reported last week that as part of its efforts to bridge the wide gap in the FX market, the security agencies, BDC operators and the Central Bank of Nigeria (CBN) held a meeting during the week.
It was learnt that the meeting was as a result of the concern of wide disparity in FX rates among the three segments of the market.
According to the source, the CBN and the security agencies present at the meeting made the BDC operators to understand that a lot of foreign investors were not comfortable with the wide gap between the three arms of the FX market and would only come in if the situation is addressed.
The President, Association of Bureau De Change Operators of Nigeria (ABCON), Mr. Aminu Gwadabe, who confirmed the meeting pledged to cooperate with the government.
He said the parley was to make the parallel market unattractive.
Commenting on the development in the FX market, analysts at Afrinvest West Africa Limited pointed out that: “In the interim, we expect recent developments to constrain supply at the BDC/parallel segments as operators withhold supplies.
“We imagine the possibility of this also leading to further fragmentation of the FX market, taking the parallel market further underground in view of the close scrutiny by security agencies. Thus, whilst parallel market rate could strengthen in the interim, the medium term outlook points to a more volatile currency.”