The EFCC-CBN joint operation to rescue the Naira yields results(Special Report)


Black markets are hubs where “economic activities” take place outside government-sanctioned channels. Also called Illegal markets, transactions here usually occur “under the table” to let participants avoid government price controls or taxes.

Over the years, Nigeria has had her fair share of the negative boomeranging effects of this illicit markets. The hardest hit sector at the moment is certainly the foreign exchanges (especially the US  dollars market) of the nation’s economy.

Here, the cumulative impacts of the dichotomy between the official market(under the control of the CBN) and these black markets are telling on Nigeria’s fiat currency, the Naira, in an unwholesome manner.

Over the month, the central bank has weakened the naira by 0.6 percent in the last two weeks through dollar interventions on the official market aimed at narrowing the spread with the black market.

The apex bank began selling dollars at lower rates to support the Nigerian currency. Devaluation of the naira to pave the way for a possible broader move to narrow black market rates.

 The central bank’s depreciation of the currency, though not taken in good faith by many, must be viewed as a deliberate effort to narrow the gap with the black market

On a broader note, Nigeria’s economic recovery plan, including measures to relax foreign exchange restrictions, has been steered at pulling Africa’s largest economy out of its first recession in 25 years. But after the Naira plummeted to an all-time low of N710.00 2 weeks ago, the value of the local currency in Nigeria increased dramatically when compared to the US dollar on the P2P market on a week-to-week basis.

 EFCC to the rescue?

The nation’s anti-graft agency recently raided currency operators in Lagos and Abuja which led to naira recovering from a record low against the dollar on the black market. This move strengthened Nigeria’s fiat curency againt the dollar at N650 per dollar on Friday, which has now seen  naira up by N60 to a dollar in the last 7 days.

 The Economic and Financial Crimes Commission (EFCC) reportedly searched bureau de change operators and questioned them about their operations while the anti-graft agents snapped photos of currency dealers and made copies of their identification cards.

 The EFCC also threatened to detain Nigerians who are keeping large amounts of dollars and other foreign currencies in reserves. In a meeting with representatives of Bureau De Change operators on Friday in the Federal Capital Territory of Abuja, Abdulrasheed Bawa, the chairman of the anti-graft agency, announced this.

 Bawa stated that the EFCC had intelligence connecting some people and organizations to the hoarding of foreign currencies, especially the United States dollars, in commercial cities all over the country, and warned those involved to stop or risk arrest as a major offensive against the speculators was underway.

 The CBN can now be said to have matched his words with actions, through conscious steps to stop the naira’s further decline, since it expressed concern about the value of the naira a few days ago

 In line with Governor Emefiele’s remarks on the currency crisis, currency speculators at these markets emphasized that enforcement agencies blamed “artificial dollar scarcity” for the naira’s problems and accused them of acquiring available dollars to create artificial scarcity.

 The Nigerian apex bank stopped providing dollars to bureau de change operators more than a year ago, accusing them of exacerbating the foreign currency scarcity by selling it on the underground market.

 Osita Nwasinobi, the director of the CBN’s corporate communications division, stated that the central bank would keep acting decisively in the foreign exchange market to stop further losses in the value of the naira.

 He cautioned forex buyers not to fall prey to the speculative tactics of some FX market participants in order to stop the naira from depreciating much further.

 According to experts, boosting dollar liquidity will be key to the naira’s further appreciation. There would undoubtedly be a decrease in the activities at the black market if the central bank keeps putting framework and structure in place to maintain liquidity.