FOREX: $1 Goes For N500
Efforts To Save The Naira Have Crumbled – IMF
Abuja & Lagos (New Telegraph) – The naira fell close to N500 against the dollar on the parallel market due to dollar shortages yesterday as Bureaux De Change (BDC) operators set their quotes for dollar purchases at N399/$ for next week, traders said . . .
In an internal memo to its members, the Association of Bureaux De Change Operators of Nigeria (ABCON) said the Central Bank of Nigeria (CBN) had approved N399 to the greenback for retail trades next week.
The government has been putting pressure on BDC operators to narrow what it says is a damaging wide gap between the naira’s official rate – currently at 305 to the dollar – and the parallel market – which hit N498/$ yesterday.
The development comes barely twenty four hours after the International Monetary Fund (IMF) said in a report that efforts to save the naira by rationing foreign exchange have gradually crumbled.
In its policy paper on macroeconomic developments and prospects in Low-Income Developing Countries (LIDCs), unveiled on Thursday, the IMF also said the challenges around foreign exchange in Nigeria have pushed inflation to double digits in Africa’s largest economy, adding that the failures in the economy were due to: “delayed/poorly managed policy adjustment.”
According to the Fund: “There were sharp movements in currencies across many LIDCs during 2015. Further sizeable depreciations were recorded in 2016 in commodity exporters under stress.
“Mongolia, where reserve levels have been significantly eroded, and Nigeria, where efforts to support the naira through foreign exchange rationing have gradually crumbled”.
Continuing, the IMF stated that: “Inflation has risen to troubling levels in a handful of cases, concentrated in sub-SaharanAfrica.
Among commodity exporters, large exchange rate depreciations were a key contributor in Mozambique, Nigeria, and Zambia”.
The IMF attributed the failures to lack of business confidence in conflict zones and delay in policy adjustment by the country’s leadership.“Domestic policy failures cited include delayed/ poorly managed policy adjustment to lower commodity prices — as in Nigeria, where foreign exchange rationing adversely affected debt service capacity of many corporates.
Nigeria (is) affected by Boko Haram-led attacks in the north and disruptions to oil production in the Niger Delta region. Aside from direct damage and increased security outlays, conflict situations undermine business confidence,investment, and tourism,” the Fund stated.
Significantly, the IMF also said that Nigeria’s financial developments affected neighbouring countries like Chad, which also plunged into a recession, and Benin.
“External developments have predictably played an important causal role in the emergence of financial sector stress, through falling commodity prices, declining remittances, and adverse spillovers from neighbors — as in the impact of Nigeria’s economic difficulties on Benin,” the Fund said.
It will be recalled that a year ago, IMF Managing Director, Christine Lagarde, met with the Minister of Finance, Mrs. Kemi Adeosun, CBN Governor, Mr. Godwin Emefiele and President Muhammadu Buhari during she called for subsidy removal and devaluation of the naira — both of which have been done.
© 2017 Madjack Business Report