The continued diversion of export proceeds by exporters and diaspora remittances to the parallel market are responsible for the ongoing depreciation of the Naira against the dollar, global foreigm exchange (forex) dealers have said.
Trading Desk Manager, AZA, a global forex trading portal, Murega Mungai, said the depreciation of the Naira would continue until there is regulatory sanctions against the perpetrators of the act, especially exporters.
The Central Bank of Nigeria’s (CBN) Foreign Exchange Manual provided that all exporters should repatriate export proceeds to the country to support the local currency and boost the economy, but compliance with the guidelines has become a major challenge.
Nigeria also receives over $25 billion annually in diaspora remittances, mainly from its citizens living or working in Europe, America and Asia. The inflows of the diaspora remittances now diverted to parallel market have for years remained the backbone of the naira by deepening market liquidity.
In a report, “Christmas stocking is no gift for Naira”, Mungai said many companies and individuals are diverting export proceeds and remittances away from approved channels while directing unmet dollar demand to the parallel market.
He said as dollar scarcity continues to linger, the naira would come under more pressure that will weaken its value against other global currencies.
“The naira traded as low as N496 to the dollar as Nigeria recorded its worst recession in three decades, with the economy shrinking 3.62 per cent in the third quarter as a result of lockdowns, border closures, currency restrictions and protests. The dollar demand pressure continues to weigh in from importers stocking up for Christmas sales,” Mungai added in emailed note to foreign investors.
Also, dollar demand pressure has continued to weigh in from importers stocking up for Christmas sales, and finding it difficult to source from the official market, are directing their demand to the parallel market.
The Naira on Thursday exchanged at N496 to dollar at the parallel market as exporters continued to move huge free earnings to the parallel market where major transactions are now being handled.