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| Dollars |
The
financial sector appears to have entered a heightened pressure, yesterday, as
both the foreign exchange and stock market sustained major negative trends.
The Naira
depreciated further to a 43-year low at N305 per dollar as scarcity of dollars
intensified in the unofficial market.
From an
average of N287 per dollar on Tuesday, the parallel market exchange rate rose
to an average of N305 per dollar across the country.
Similarly, the new year stock market haemorrhage entered the eighth day yesterday, with a total N1.22 trillion losses to investors, giving a year-to-date decline of 12.36 per cent in market capitalisation.
The
market key index, the Nigerian Stock Exchange All Share Index, NSE ASI,
declined year-to-date by same margin.
The stock
exchange, which opened this year at market capitalisation of N9.851 trillion
began a free fall till yesterday, closing at N8.63 trillion while the NSE ASI
which opened the year at 28,642.25 points closed yesterday at 25,103.05 points.
The
losses were heightened in the last 48 hours with a cumulative two-day loss of
N430 billion following the escalated foreign exchange management crises which
came with CBN’s announcement of its decision to cease sale of foreign exchange
to BDCs on account of the precarious state the operators had forced the entire
economy.
Since
Monday when the Central Bank of Nigeria (CBN) stopped weekly dollar sales to
Bureaux De Change (BDCs), the Naira has been depreciating against the dollar.
BDC
sources who confirmed the development to Vanguard , however, said that the
exchange rate situation is uncertain as the rate changes from time to time.
Vanguard investigation revealed that though the exchange rate touched N305 in
major cities like Lagos, Abuja and Kano, it dropped slightly to between N295
and N300 per dollar in Lagos and Abuja at the close of business, while it
closed at N305 in Kano.
Chief Executive Officer, H.J Trust BDC, Mr. Harrison Owoh, said that the market is fluid.
“You
cannot quote any rate for anybody now because the rate is changing every time.”
An Abuja
based BDC operator who spoke on condition of anonymity said that
the rate closed in Abuja at N298 but was above N300 during the day. He however
said that it was difficult to quote any specific rate now as the situation was
unpredictable. He opined that the rate would stabilize by next week, when the
market would have absorbed the impact of the new CBN policy.
Financial
analysts believe that the CBN’s state-of-the-economy address which came with
the BDCs forex ban are having immediate negative effects on the economy,
causing investors to withdraw from the Nigerian bourse to safer securities on
the continent.
Justifying the ban, the CBN Governor, Mr Godwin Emefiele, had said: “This fall
in oil prices also implies that the CBN’s monthly foreign exchange earnings has
fallen from as high as US$3.2 billion to current levels of as low as US$1
billion.
“Yet, the
demand for foreign exchange by mostly domestic importers has risen
significantly. For example, the last we had oil prices at about US$50 per
barrel for an extended period of time was in 2005. “At that time, our average
import bill was N148.3 billion per month.
‘’In
stark contrast, our average import bill for the first nine months of 2015 is
N917.6 billion per month, even though oil prices are now less than US$35 per
barrel.
“The net
effect of these combined forces unfortunately is the depletion of our foreign
exchange reserves.
‘’As of
June 2014, the stock of Foreign Exchange Reserves stood at about US$37.3
billion but has declined to around US$28.0 billion as of today.
“With the
current economic realities in the country, the NSE, with the aim of hitting
N200 trillion market cap by 2019, may well be moving away from its target.
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