The Naira plunged to N520 against the U.S. dollar at the parallel market on Monday, after the CBN announced its readiness to sell dollar at N375 for school fees payment and personal travel allowance on Friday.
The Naira which had closed at N516 to a dollar on Friday, following a record low of N510 on Thursday remained weak despite the rising oil prices and national foreign reserves.
A Reuters report, attributed the fall in Naira value to retail currency trader’s reservation on the new forex policy as they tried to price in its possible impact on the market current rate and commercial banks approach to the announced policy.
Experts have said the announcement has increased the demand for dollar for school fees payment as well as personal travel allowance by intending travelers, leading to forex scarcity as demand currently outweighs supply.
“The CBN needs to do more on the intervention side to manage the situation since the apex bank has insisted on forex flexibility policy,” said Samed Olukoya, a foreign exchange research analyst at Investors King Limited. “Intermittent intervention and speedy disbursement of the $20 million announced on Friday and commercial banks adherence to the new policy are strong determinants to how well the new policy will alleviate parents and travelers suffering,” he added.
Currently, market illiquidity has forced Bureau De Change operators to source dollars from private sources and resell at a much higher price, pushing the black market rate even higher as retail currency traders depend on Bureau De Change for supplies.