Analysts, ABCON Upbeat about Further Appreciation of Naira

*Naira redesign throws ISWAP into confusion, terrorist group taxes farmers, traders in CFAs

Festus Akanbi

As the nation’s foreign exchange users continue to bask in the euphoria of last week’s rebound in the value of the naira, especially at the open market, financial analysts and the Association of Bureau de Change Operators of Nigeria (ABCON) at the weekend said the coast is clear for the local currency to record a further rise in its value as the new week unfolds.

This is coming as the Shura Council of the Islamic State of the West African Province (ISWAP) has banned naira as a means of transaction for the illegal tax it collects from peasant farmers, fishermen and traders.

The Naira, which had succumbed to the speculative activities in the forex market to hit an all-time high of N901 to a US dollar earlier last week, recorded a considerable level of appreciation as it closed at N710 to a dollar at the open market on Friday.
However, the value appreciation did not reflect in the activities at the Investors and Exporters FX window, where the Naira lost N0.25 or 0.06 per cent week-on-week to close at N445.75/dollar from N445.50/dollar in the previous week’s close.

Reacting to this development, analysts from Cowry Asset Management Company described the current fate of the naira as a reflection of the different measures put in place by the regulatory authorities including the Central Bank of Nigeria (CBN) and the Economic and Financial Crimes Commission (EFCC).
It also attributed the panic sale of the dollars to the purported planned withdrawal of some categories of dollars from circulation by the United States government.

Their views were corroborated by the Association of Bureau de Change Operators of Nigeria (ABCON), which echoed the optimism of financial sector watchers on the capacity of the current arrangement to bring about further appreciation in the value of the naira in the new week.
In the last week’s edition of its weekly report; Cowry Weekly Financial Markets Review & Outlook (CWR), which was released on Friday, the financial advisory firm noted  that “in the coming week, we anticipate the calm to continue across all segments of the FX market barring any distortion in the market and coupled with the fact that traders will look to offset their dollar holdings at a discount following the recent announcement by the United States over illegal dollars in circulation.”

The company, which drew a link between the policy of the naira redesign of the CBN and the improved value of the local currency noted that “after reaching its historical low of N910 last weekend, a breath of fresh calm returned to the foreign exchange rate market following the announcement by Nigeria’s federal government with no going back on its decision to redesign the Naira as a strategy to curb hoarding, round-tripping and consequently clip the wings of currency speculators who are fuelling rising demand for the dollar across all market segments.

“Consequently, this prompted the Economic and Financial Crime Commission (EFCC) to begin clamping down on some currency traders (especially BDC Operators) and bringing losses to currency speculators who took no other option but to maintain bids between N720/USD and N800/USD during the week.”
A frontline forex dealer and ABCON President, Aminu Gwadabe, who acknowledged last week’s rise in the value of the naira, said the CBN’s policy of Naira redesign which had triggered volatility in the exchange rate at the initial stage, is now compelling currency hoarders to bring their money into the banking system, explaining that the exercise is largely responsible for the appreciation of the naira value.

Quoting unconfirmed statistics, Gwadabe said as of Friday, no less than N60 billion had been returned into the vaults of Nigerian banks, a development he attributed to the reduction of pressure on the naira.
He said: “Unconfirmed statistics suggested that about N60 billion naira cash have been deposited with the Deposit money banks in the period under review and invariably reducing the cash content that is putting pressure and attack on the naira.”

The ABCON President also recalled that the CBN has introduced several demand measures to curtail unnecessary import bills. The apex bank, he said, has also introduced incentives on export proceeds that have significantly added about $3 billion to the economy.

He believed the renewed efforts of the various security agencies against economic saboteurs including politicians would continue to tame the value of the naira.
“The surveillance has created immense awareness and caution on currency substitution, hoarding, and rent-seeking and these efforts are increasing further confidence in the value of our local currency and discouraging the high demand for foreign currency.”

On how to sustain the current tempo, Gwadabe stated that the CBN should introduce measures to close the gap between the fixed versus flexible exchange rates by making the flexible exchange rates even cheaper than the CBN windows through friendly and competitive liberalisation measures on diaspora remittances and export proceeds.

“There is also the need to inject liquidity to the critical retail end sector of the market by leveraging on the potency of the BDCs transmission mechanism of the CBN monetary policies,” the ABCON President explained, adding that with the strategic global attack on the dollar, both monetary and fiscal policymakers should embrace digital currencies for global competitiveness.

Earlier last week, Gwadabe confirmed that the Naira has continued to firm against the Dollar at the parallel market as the target date for the introduction of redesigned naira notes by the CBN draws closer.
“There is an observed growing return to sanity in the parallel market as the deadline for the cancellation of the old notes and introduction of the new notes in circulation come closer.

“The market is witnessing a dull moment as the spiral volatility in the exchange rate of the local currency nosedived.
According to him, the new world order may likely lead to a global financial distortion that will challenge the hegemony of the American dollar.
The ABCON chief said the development became paramount as demands for foreign currency were being diverted to the commodity market.
He noted that a tonne of hibiscus (zobo) which was selling for N500, 000 jumped to N1million per tonne.

“A bag of millet which was selling for N18,000 per bag now sells for N24,000 per bag,” he said.
Meanwhile, the Shura Council of the Islamic State of the West African Province (ISWAP) has banned the naira as a means of transaction for the illegal tax it collects from peasant farmers and fishermen.

This is a result of the Nigerian government’s move to redesign and reissue higher denominations of its currency.
It was gathered that this move threw the ISWAP population in the Tumbus of Lake Chad into confusion.
According to the Zagazola Makama, a Counter Insurgency Expert and Security Analyst in the Lake Chad region, the insurgents have switched to the West African CFA as the currency of trade in the area.

Makama claimed that the terrorists had also banned all Nigerian fishermen, herdsmen and farmers from sneaking into Lake Chad through Marte, Abadam, and Gamborun Ngala in order to prevent the naira from reaching the camps of the terrorists in Lake Chad.

Ibn Umar and Malam Ba’ana, the ISWAP militant commanders in charge of taxes and levies, who imposed the ban, said the people were only allowed to come through safe routes established by the terror group – Bulgaram, Cikka, Guma, Maltam, Doron Liman and Ramin Dorina villages in Cameroon Republic.
In exchange, ISWAP collects 1,500 West African CFA Francs, monthly taxes from the people who appear very willing to pay.

They have also secured trade routes for merchants, to enable them access foodstuffs, weapons, fuel and other logistics.
The Nigerian authorities are yet to react to the latest development, but there have been denials from the government that terrorists are not controlling any part of the country.