Author Topic: DOLLAR CRASHES AT PARALLEL MARKET  (Read 4460 times)

Offline Prince

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DOLLAR CRASHES AT PARALLEL MARKET
« on: March 23, 2009, 10:11:09 AM »
The measures put in place by the Governor of Central Bank of Nigeria (CBN), Prof. Chukwuma Soludo, to stabilise exchange rates appear to be achieving the desired results as the wide gap between the official and parallel markets narrowed at the weekend, $1 exchanging for N160.
As at the close of business last Friday, a dollar exchanged for N147.51 at the official foreign exchange (the CBN daily forex auction), indicating a difference of N12.49 when compared with last weekend?s the parallel market rate of N160 that went as high as N188 per dollar about a week ago.
In the official market, the naira, which exchanged for N118 before November  26, 2008, has tumbled 20 per cent against the dollar as the global financial crisis and the slump in the oil price led investors to pull funds out of the country.
The drop was finally triggered by the central bank?s decision to stop using foreign exchange reserves to defend the currency to avoid running out of reserves.
Crude oil, which accounts for over 90 per cent of Nigeria?s export earnings, slumped to as low as $40 a barrel from a record $147.27 a barrel last July.
Last week, the banking watchdog had stepped up supply of dollars to Bureau De Change (BDCs) operators by as much as $200 million a week with a view to narrowing the gap between the official and black market exchange rates.
CBN also flooded the foreign exchange market that had been initially starved with dollars by selling forex on daily basis to banks and qualified Bureau De Change.
?We?ll supply whatever is necessary to get the economy on an even keel,? Soludo said.
?If the market is going to absorb between $100 million and $200 million between now and next week, we?ll supply,? Soludo told journalists last Tuesday in Abuja.
As the supply of dollars to the market improves, the gap between the official and the black market rates would drop, Soludo said.
He recalled that the problem in the foreign exchange market started when the apex bank stopped funding of the market.
The stoppage, he said, was informed by the decision of the Federal Government to stop funding illegal foreign exchange market to cushion the effect of global financial crisis.
?Our first policy is to conserve the hard-earned foreign exchange resources, we cannot do this by selling foreign exchange to road side users,? he said.
The governor said all the currency speculators in the next few weeks would have themselves to blame as the apex banking would flood the market with foreign exchange
In a bid to ensure that the new policy achieves the desired effect, Soludo said that the CBN would only sell the dollars to class?A? Bureau De Change and the bank Bureau De Change.
Over the past seven months, the apex bank had become the largest supplier of foreign exchange in the domestic market, controlling almost 90 per cent of total supply as against 10 per cent in the first quarter of last year.
Other supply sources, especially foreign direct and portfolio investments, home remittances (Western Union etc) have since dried up as a result of the global liquidity and credit crises.
Besides, further oil price weakness and the release of the 2009 preliminary budget last November coupled with the targeting of a deficit of N1.1 trillion ($9.4 billion) for this year, up from N560 billion ($4.8 billion) in 2008, may also have led to further weakness of the naira.
Last month, the apex bank raised the minimum capital requirement for bureaus to access foreign exchange auctions to N500 million, up from N10 million, in a bid to stop funds flowing to the black market.
Other measures put in place by the CBN include:
? Special foreign exchange interventions in which cash will be sold to the registered Bureau De Change (BDC) of the deposit money banks and only banks with large branch network shall be engaged for this purpose at the initial stage.
? Foreign exchange in cash to be made available at all CBN branches for ease of accessibility by the authorised dealer banks.
? The banks will purchase forex cash by submitting bids. The banks? BDCs will sell at no more than two per cent above the CBN rate.
? Each bank BDC will be entitled to purchase a maximum of $5 million per week and funds from the CBN will not be re-sold except to end users subject to the guidelines below.
Eligible transactions, documentations requirement and limits are: one, BTA subject to letter of request from the corporate body, international passport, air ticket, endorsement of passport by BDC stating the amount sold, and a limit of $5,000 per quarter; two, PTA maximum limit of $4,000 per quarter; three, school fees abroad for university and high schools subject to school bill, admission letter and a maximum of $10,000; four, medical bill abroad subject to a referral letter from a spe...t hospital and a maximum of $10,000 per case; and five, credit card payment subject to a limit of $5,000 per quarter.
Others are mortgage monthly payment abroad, subject to duly executed assignment, demand note/invoice and a maximum limit of $5,000 per annum; and utility bills subject to documentary evidence and a maximum of $5,000.
The CBN will meet in Abuja today with bank treasurers with a view to intimating them of the developments.
Commenting on the new measures, a treasurer in one of the big banks said it would have a dampening effect on the parallel market because banks that operated BDCs were not selling foreign exchange to end users since there were no clear guidelines as to the amount they could sell.

?Before now, the BDC of banks did not know the amount of forex they could sell. So, they refused to sell because they did not want the CBN to descend on them. But now that there is a clear guideline, banks will sell and this will help to reduce the naira exchange rate at the parallel market,? he said.

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DOLLAR CRASHES AT PARALLEL MARKET
« on: March 23, 2009, 10:11:09 AM »

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Offline beibee

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #1 on: March 23, 2009, 12:08:50 PM »


ray of hope streaming in?
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Offline Prince

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #2 on: March 23, 2009, 12:40:57 PM »
It's a bad news, i prefer a strong dollar.

Offline furtune

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #3 on: March 23, 2009, 03:04:46 PM »
that is good if the naira could take it stand back
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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #4 on: March 23, 2009, 03:24:55 PM »
Exactly
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"I can make it, no matter what!"

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #5 on: March 24, 2009, 12:02:25 AM »
too bad......................
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Offline furtune

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #6 on: March 24, 2009, 04:40:23 PM »
does who deal internationally would be really affected
well, could be either way, it all depends.
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Offline solo

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #7 on: March 25, 2009, 09:14:49 PM »
does it mean we don't have good forecasters here.
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Offline Prince

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #8 on: March 25, 2009, 09:17:19 PM »
Economy determine how strong a currency will be.

Offline solo

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #9 on: March 25, 2009, 09:20:18 PM »
but it is the work of the forecasters to know when the economy is going to be good or bad..........
is that not it?.
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Offline Prince

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #10 on: March 26, 2009, 05:29:23 AM »
forecasters are not govs, it's only a gov that can try and pay there country loan and develop it.

Offline solo

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #11 on: March 26, 2009, 09:58:09 PM »
that is real thing because they are the ones holding the whole system.
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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #12 on: June 08, 2009, 10:30:15 PM »
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Offline solo

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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #13 on: June 09, 2009, 04:33:20 AM »
WRONG POST!!!!!
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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #14 on: September 18, 2009, 10:22:56 AM »
why make so much fuss over dollar? the only thing that can be done with this currency is just it's emission, nothing else.  it already has lost all the support it had and now because of the dollar gold prices are too low
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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #15 on: September 18, 2009, 02:36:42 PM »
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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #16 on: November 30, 2009, 01:36:00 PM »
i do not think d naira can ever stand again even with d economy problem d world is havin
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Re: DOLLAR CRASHES AT PARALLEL MARKET
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Re: DOLLAR CRASHES AT PARALLEL MARKET
« Reply #17 on: December 12, 2010, 04:29:34 PM »

 

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