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Finance Analyst, Aja: Naira Strengthens as Forex Subsidy Boost BDC Operators

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Attributed to the intervention of the Central Bank of Nigeria in the foreign exchange market through subsidized rates for Bureau De Change operators, financial analyst Kalu Aja pointed out the recent appreciation of the Naira.

Earlier this week, the CBN provided $10,000 to each BDC at a rate of N1,251 per US dollar.

Commenting on this development, Aja emphasized that such measures would not be sustainable without substantial foreign reserves.

He highlighted that the root of Nigeria’s forex challenges lies in the decline of exports, particularly in crude oil.

In his analysis, Aja mentioned, “This temporary solution signifies the CBN’s attempt to address a deep-rooted issue that requires a significant stockpile of FX reserves. The fundamental resolution lies in boosting exports.”

Additionally, he expressed, “The CBN operates as a financial institution, not as NNPC or the executive arm, hence its limitations in influencing oil production.”

Regarding the recent emphasis on a ‘strong naira’ through Forex sales to BDCs, Aja observed the portrayal of a net-positive FX inflow (current account surplus).

He metaphorically stated, “We praise a facade of financial stability, which may appear appealing externally, but it conceals the unsustainable high expenses incurred in defending the Naira.”

Recent reports show a consistent strengthening of the Naira against the US dollar in the forex market over the past few weeks.

As of Monday, the Naira traded at rates of N1,360 and N1,408.04 per USD in both the parallel and official foreign exchange markets.

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