Despite stepping up their clampdown on currency traders, it seems operatives of the State Security Service (SSS) are making little headway in trying to ensure that the naira does not exchange for above N400 to the dollar.
The local currency was still being traded between N460 and N465 to the greenback in Lagos and Onitsha last weekend, barely 24 hours after SSS operatives raided forex dealers in some major cities across the country. Last Friday, the operatives reportedly arrested about 40 people in Kano, for allegedly selling foreign currencies above the official rates.
A similar exercise was reported in Anambra State, where security operatives took several alleged offenders away after a visit to some markets in Onitsha where foreign currencies are usually sold.
Also, in Lagos last Friday, currency dealers around the popular Broad Street/CMS area deserted their offices after learning that some of their colleagues had been arrested by the SSS.
The raids, which commenced in Abuja and Lagos three weeks ago, are said to be part of efforts by the Central Bank of Nigeria (CBN) and the Association of Bureaux De Change Operators of Nigeria (ABCON) to stabilise the exchange rate on the parallel market by ensuring that currency dealers do not sell dollars to buyers above N400.
The raids initially seemed to boost the naira as the local currency appreciated from a low of N480 to a dollar on the parallel market to about N455/$ in the first week of the clampdown. But in recent days, the naira has started to depreciate as the money changers have been forced to go underground to escape arrest.
The development has worsened forex scarcity in the system, as many dealers prefer not to sell at the official rate. Interestingly, while some of the online sites used by the forex dealers quote the official rate of N400/$, they tell buyers who come to their offices that they have run out of dollars.
A forex dealer, who did not want to be quoted, said: “The raids will not be effective. You cannot use force to resolve issues like this. Parallel market operators are like street traders; they don’t really have offices, so, how are you going to check them?
At the end of the day, dollar will become so scarce in the market that people will be ready to buy at very high rates.
The only solution is to increase dollar supply.” It will be recalled that with the naira exchanging on the official interbank market at N305 to the dollar, the apex bank reportedly reached an agreement with ABCON to ensure that the naira does not exchange for more than N400/$ on the parallel market.
This was after the regulator had directed agent banks to International Money Transfer Operators (IMTOs) to sell dollars received from such firms via remittances to BDCs.
However, following banks’ failure to comply with this directive, the regulator suspended most of them and appointed Travelex to sell forex to licensed BDCs, which are not to sell foreign exchange above two per cent margin of the buying rate