The sharp depreciation of the naira in the parallel market triggered by the deregulation of petrol importation continued yesterday, with the naira depreciating to N370 per dollar.
The Petroleum Products Pricing Regulatory Agency, PPPRA on Wednesday said that, with the deregulation of petrol importation, importers will henceforth be permitted to source for their foreign exchange requirements from secondary sources.
This triggered speculation and increased demand for the dollars in the parallel market on Thursday, halting the two-month exchange rate stability in the market. On Thursday the naira lost N7 naira to the dollar, as the exchange rate rose sharply to N334 per dollar from N320 per dollar.
This persisted yesterday with the parallel market exchange rate rising to N370 per dollar, indicating N50 depreciation of the naira in two days.
Investigations revealed that the sharp depreciation was driven by two factors, increased demand for dollars and hoarding in anticipation of further depreciation of the naira.
According to a BDC operator who spoke to a reliable source, “With the exchange rate going up, those who have dollars don’t want to sell, expecting the rate to rise further so as to maximise their returns.” Recall that the naira depreciated to N400 per dollar in February in the parallel market before retreating to N320 by the end of the month due to declining demand by importers.
According to President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alhaji Aminu Gwadabe, “The market has been stable all this while due to drastic reduction in import activities hence demand for dollars by importers reduced sharply. Those who had bought dollars when the rate was high and used it to import were having difficulty selling their goods, hence those who are still importing have reduced.
But the announcement yesterday has changed the whole thing. More demand for dollars for petrol importation is expected in the market; meanwhile, there is no supply of dollar. Some people with dollar, especially those who bought when the exchange rate was high, feel the rate is too low for them to sell, hence they are withholding their dollars, waiting for the rate to go higher.”