May 28, 2024

The recent actions by the Economic Financial Crimes Commission (EFCC) to clamp down on currency speculators and unauthorised currency traders come amidst a backdrop of the naira’s further depreciation against the US dollar. The raids, conducted in Abuja, Lagos, Kano, and Port Harcourt, aim to address the increasing pressure on the naira caused by activities in the forex and cryptocurrency markets.

These efforts follow previous arrests of Bureau De Change (BDC) operators accused of speculating against the naira. Despite resistance from some operators, law enforcement agencies have continued their crackdown, leading to disruptions in market activities and heightened caution among traders.

The prevailing exchange rate at the parallel market stands at N1,540 per dollar, reflecting a 4.05% depreciation compared to the previous day’s rate. Similarly, the official foreign exchange market witnessed a 3.04% depreciation, with the dollar quoted at N1,520 on Tuesday.

Factors contributing to the naira’s depreciation include a shortage of dollars due to repatriation by foreign portfolio investors and a decrease in the supply of dollars in the market. Despite temporary stability observed in April, recent declines underscore the ongoing volatility in the exchange rate.

The Central Bank of Nigeria (CBN) has implemented various measures to curb speculation on the naira, including prohibiting foreign currency collaterals for naira loans and aligning exchange rates with prevailing market rates. However, sustained efforts to improve FX liquidity through exports and foreign capital inflow are deemed necessary to strengthen the naira and achieve macroeconomic stability.

Economists emphasize the importance of creating a conducive environment for FX inflow, particularly through trade and capital importation. Addressing policy uncertainties and enhancing non-oil exports are essential steps towards stabilizing the naira and sustaining the gains achieved through regulatory reforms by the CBN.

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