EFCC Raids Speculators As Naira Drops To 1,520/$

On Tuesday, operatives of the Economic and Financial Crimes Commission broadened their crackdown on Bureau De Change operators, arresting traders in Abuja, Lagos, Kano, and Port Harcourt, The PUNCH reports.

This came as the naira weakened further against the United States dollar at both the official and parallel foreign exchange markets.

The recent raids followed renewed efforts by the Federal Government to tackle the naira’s recent fall against the greenback.

The activities of currency speculators in the forex markets and the digital cryptocurrency space have reportedly increased pressure on the naira, with the government accusing crypto traders of speculating against the national currency.

Last week, some BDC operators were arrested in Abuja for allegedly speculating against the naira.

Despite resistance by some BDC operators, law enforcement officials have continued to conduct regular raids on unauthorised currency traders in the Federal Capital Territory.

Currency operators, who spoke to one of our correspondents, confirmed that the latest sting operations occurred at various times during the day in Lagos, Kano Port Harcourt and Abuja on Monday.

Malam Yahu, a trader at the popular Wuse Zone 4 market, said currency traders at Lagos, Port Harcourt and Kano confirmed sting operation by EFCC operatives, a development that disrupted market activities.

He said the fear also trickled down to the Abuja market as traders decided to reduce trading for fear of being arrested.

Yahu also said the naira was bought and sold for N1,520/$ and 1,540/$.

He said, “The naira is now N1,540 and we are buying at N1,520. But the issue now is that the EFCC guys scattered the market in Lagos, Port Harcourt and Kano today. As a result of the development, the traders in Abuja were very cautious about trading.

“So in Abuja today, people are afraid because we don’t know when they will come too and nobody wants to be arrested. It is also part of the reason for the high rate.

“Traders are also afraid of buying at a high price because they are cautious that the dollar may crash at any time. Our brothers in Lagos and Port Harcourt are complaining about the arrests.

Another trader, Abubakar Taura, confirmed the same rates and the arrests by security agents.

“Yes, we heard today that EFCC operatives have started arresting people in other states,” he said.

The President, the Association of Bureau De Change Operators, Aminu Gwadabe, confirmed the raid, saying however that the EFCC operatives primarily focused on street traders.

He confirmed that some registered BDC operators were affected in the raid.

“Yes, the EFCC operatives raided street traders although some of our members were also affected. The government is trying to deal with illegal practices. We believe the currency will appreciate with time,” he said.

At the parallel market, the naira closed at N1,540 per dollar.

This represents 4.05 per cent or N60/$1 depreciation compared to the N1,480 quoted on Monday on the black market.

The renewed naira depreciation after the gains in April 2024 was attributed to a shortage of dollars occasioned by the repatriation of funds by foreign portfolio investors.

Similarly, official FX trading at the Nigerian Autonomous Foreign Exchange Market witnessed a depreciation in the value of the local currency by 3.04 per cent as the dollar was quoted at N1,520 on Tuesday, weaker than N1,478 quoted on Monday.

This is the lowest in over six weeks and the first time the official rate will close above N1500/$1 since March 19, 2024.

The intra-day high also plummeted to N1,568/$1 from N1,515 recorded on Monday pointing to an even weaker exchange rate at some point during the day, according to data from FMDQ, where currencies are traded officially.

The intra-day low was N1,350 on Tuesday from N1,301 recorded on Monday.

The intra-day high represents the highest price at which the dollar traded against the naira on the official market during a single day of trading. The exchange rate typically fluctuates throughout the day

The amount of dollars supplied by willing buyers and willing sellers also decreased by 40.8 per cent or $88m to $128.76m from $217.64m on Monday.

The naira had extended its appreciation from mid-March till mid-April, before the recent decline. The naira however closed flat against the dollar in April, appreciating only by about 0.04 per cent in the official market.

The temporary stability occurred after the CBN interventions aimed at curbing speculation on the naira.

Some of the measures taken by the CBN included the prohibition of Foreign Currency Collaterals for Naira Loans and the directives to the International Money Transfer Operators to align their exchange rates with prevailing market rates at the official foreign exchange market.

In February 2023, the Yemi Cardoso-led CBN implemented the first interest rate hike, raising the MPR by 400 basis points to 22.75 per cent. This was followed by an additional increase in March, raising the MPR by 200 basis points to 24.75 per cent. The hikes in interest rates coincided with a strengthening of the naira, which appreciated to as high as N1,150/$1.

Commenting on the latest development, an economist at the Nigerian Economist Summit Group, Faith Iyoha, said the naira was still experiencing volatility due to the absence of fundamental FX liquidity policies.

Faith, who spoke in a telephone interview on Tuesday, said the sufficient condition for strengthening the naira must be an increase in FX liquidity which according to her is only possible through exports and foreign capital inflow, both of which the country currently lacks.

She added that although the apex bank had made some changes, there was still a need for an improved macroeconomic space.

She said, “The exchange rate has been largely volatile over time and there are fundamental reasons why it has been like that.

“It is important to give credence to the reforms that CBN has put in place and other regulatory approaches but while these are necessary approaches, they are not sufficient to strengthen the naira.

“The sufficient condition for strengthening the naira must be an increase in FX liquidity which is only through exports and foreign capital inflow.

“From the export angle, while we have crude oil, the production has been largely below 2m barrels and that means an instability in inflow.”

She added, “We still have to improve non-oil exports as well. In terms of capital importation, we have seen the exit of portfolio investors due to large instability and there is no clarity in the market. There is instability in the sense that we are not certain about the policies that are going to come up in the next few months especially when we talk about taxes and levies.

“So you see that the cybersecurity levy has been suspended, such policies give investors a sense of instability and uncertainty and in that way, they exit the market. So it is important to state that for the naira to gain stability, we must improve FX inflow, especially through trade.

“We must create macroeconomic stability that incentivises the inflow of foreign capital and if it doesn’t happen, there is no way we can sustain the strength that the naira gained based on reforms by the CBN.”