BY HOPE MOSES
Federal Government can succeed in eliminating the black market or the exchange rate spread if it improves on foreign exchange supply or allows price mechanism to play its role, according to Johnson Chukwu, managing director/CEO, Asset Management Limited.
“If they are able to meet demand and allow price to adjust to demand and supply equilibrium, they can eliminate black market,” he told BusinessDay on phone.
Naira on Tuesday traded stable at all segment of the foreign exchange market as the Federal Government looked for ways to end the spread between the interbank and parallel market rates.
After trading yesterday, the local currency closed at N490 against the dollar, the same as Monday. It also remained stable, closing at N305.25k at the interbank spot market yesterday.
The naira is trading on the parallel market some 40 percent lower than the official rate, as low global crude prices have dried up vital oil revenues and pushed Africa’s largest economy into recession.
A call made at the Central Bank of Nigeria (CBN) yesterday could not go through. The CBN scrapped a 16-month-old peg of N197 to the dollar in June, but it continues to trade in the official market, so that the naira remains far stronger against the dollar than on the parallel market. The government has blamed that black market for damaging the already shaky economy.
The CBN is working on the elimination of arbitrage,” Kemi Adeosun, finance minister, told Reuters by text message, without saying how this would be done.
She earlier told a conference that the CBN was working on removing the price difference. Adeosun said this had been in response to a question about manufacturers not getting incentives to produce given an arbitrage opportunity.
Reuters reported that CBN spokesman, Isaac Okorafor, said the central bank was working towards “ensuring that the forex market operates as effectively as we would envisage.”
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