The Naira continued to depreciate in the
review week. At the parallel market, naira exchanged for N498/$ on January 27,
2017 and N500/$ on February 3, 2017. Despite the weekly sales of forex to BDCs and
the significant improvements in the external reserves, the naira has continued
to lose value to other currencies. The pressure on the naira has been triggered
by escalating scarcity of forex in the spot market, likely due to
forex hoarding. However, in the preceding week, the CBN sold $660 million in forwards
contract in an attempt to manage liquidity and stabilize the naira.
In the face of growing speculation in the parallel market, the monetary
authority should institute mechanisms that would discourage excessive forex
hoarding among licensed BDC operators. An initiative that monitors transaction
dealings in the parallel market would go a long way in detecting erring BDC
operators.