01 September 2015, Lagos – The Naira depreciated by N5 to N220 per dollar yesterday in the parallel market as dollar demand to fund hajj pilgrimage and payment of school fees increased demand for the United States currency.
From an average of N215 per dollar at the close of business on Friday, the parallel market exchange rate rose sharply to N220 per dollar yesterday, in Lagos and Abuja.
Confirming this development to Vanguard, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Alh. Aminu Gwadabe stated, “The demand is very high and the buyers willing to pick dollars at any available price. Also the demand of dollars by importers is increasing at an alarming rate.”
Managing Director/Chief Executive, H.J Trust BDC, Mr. Harrison Owoh, said there is huge demand from those going for the Hajj pilgrimage. He noted that 66,000 people were approved for the Hajj while the Central Bank of Nigeria, CBN, approved maximum sale of $1000 to each pilgrim at N160 per dollar. But each of them needs about $6000 for the pilgrimage hence they are in the market to source for the balance.
A BDC operator in Abuja who spoke to Vanguard on condition of anonymity said there is also huge demand for payment of school fees abroad. He noted that recent restrictions on dollar deposit and withdrawal from domiciliary account, has compelled people with children schooling abroad to visit the parallel market to buy dollars or pounds to pay school fees.
It would be recalled that on August 5th, the CBN banned cash deposit of foreign currency into domiciliary accounts. In a circular signed by Mr. Olalekan Gbadamosi, Director, Trade and Exchange Department, CBN, the apex bank said that payment into and withdrawal from domiciliary accounts would be limited to transfers.
The circular stated, “In its continued efforts to stop illicit financial flows in the Nigerian banking system which aligns with the anti-money Laundering stance of the Federal Government, the CBN hereby prohibits from the date of this circular the acceptance of foreign currency cash deposits by DMBs.
“For foreign currency cash lodgements made prior to the date of this circular, the account holder has the option to either withdraw his or her foreign currency cash or the Naira equivalent. For the avoidance of doubt, only wire transfers to and from Domiciliary Accounts are henceforth permissible.
“The CBN advises individuals that wish to source foreign currency for eligible and legitimate purposes such as BTA, PTA medical, mortgage, school fees, goods etc. to do so through recognised channels with the use of Form ‘A’ for “invisible” and Form ‘M’ for ‘visible’ transactions. By this circular, those who deposited foreign currencies into their accounts before the directive will now have to withdraw the cash as they are not going to be allowed to transfer the funds.”
Investigations however reveal that it is very difficult and expensive to source dollars into domiciliary accounts through transfers. Besides the documentation requirements, such dollars are sold at N230 per dollar and above, making the parallel market with dollars trading below N220 last week, more attractive to buy dollars by such parents.
*Babajide Komolafe – Vanguard