Forex Scarcity: Nigerians Withdraws Wards From Oversea Schools

As the scarcity of foreign exchange (forex) bites harder, most Nigerians that have children schooling abroad have decided that after this summer holiday, their children will settle down in Nigerian universities.
This is because, they have found it increasingly difficult to source for foreign exchange to pay oversea school fees, among other expenses that are in dollar denomination.
Ola Awoindeinde, a chartered accountant based in Lagos told Leadership that most of his friends who have their children schooling abroad have started to looking for appropriate schools in Nigeria to admit their children who are currently on summers.
According to him, there are cases where the parents have naira, but could not find dollars to buy. In so e other cases, the dollar has simply become too costly for them to afford.
Leadership investigation shows that the naira has continued to swing as the factors of demand and supply continued to fluctuate.
Findings revealed that exporters who are expected to sell dollars at the inter-bank market to increase dollar supply prefer to sell to the parallel market where the rates are higher, thus starving the official market of tne much needed foreign exchange.
The result is that naira continues to depreciate against the dollar, making it difficult for parents who have their children in oversea schools to source foreign exchange easily.
Analysts say those that have taken the decision to bring their children back to Nigerian universities may have made a very wise decision because with the removal if spread limits by the Central Bank of Nigeria (CBN), the naira is likely to depreciate to close to N400 to the dollar before it starts finding a more genuine market level.
Naira forwards rose to record highs and volatility surged after the Central Bank of Nigeria (CBN) removed a limit on bid-offer spreads in the foreign-exchange market, raising expectations the currency is set to extend declines as it trades more freely.
Three month non-deliverable forward contracts jumped 4.3 per cent to a record N329.5 per dollar, while contracts maturing in a year rose 4.3 per cent to N366.5, also the highest level on a closing basis. One-week historical volatility increased to 26 per cent, compared to an average of 8.6 per cent over the past year, according to data compiled by Bloomberg.
While the naira weakened 1.1 percent to N287.5 versus the dollar in the spot market, having swung between N280.22 and N293.38, little trading took place, according to David Willacy, a currency trader at INTL FCStone Ltd.
On Friday, the central bank ended a rule capping the difference, or spread, between bids and offers in the foreign-exchange interbank market at 50 kobo, according to Kunle Ezun, an analyst at Ecobank Transnational Inc.
“That’s why you are seeing that volatility,” Ezun said by phone from Lagos. “The spread used to make prices move within a defined range, which is not good. The expectation is that central bank will allow the market to trade freely by removing the spread and letting liquidity determine the rate.”
The naira depreciated 29 percent against the dollar last month after the Abuja-based regulator ended a 16-month peg of N197-N199 per dollar. That and the capital controls used to defend it led bond and stock investors to flee the country and exacerbated an economic crash caused by the fall in oil prices from mid-2014.
Few investors have returned to Nigeria’s markets since the devaluation and many think the exchange rate needs to weaken further. Importers of items such as glass, textiles and rice are still banned from using the interbank market to buy hard currency and are forced on to the black market, where the naira trades at about N365 per dollar.
Central bank Governor Godwin Emefiele and Deputy Governor Sarah Alade met investors in the U.S. and London last week to entice them to buy naira assets. Emefiele dismissed suggestions that there was too little foreign-exchange liquidity and said the black market was too small for them to use as a gauge of the naira’s true value, according to two people with attended the private talks and asked not to be identified.
“The interbank rate’s too strong,” Willacy at INTL FCStone said by phone from London. “You just have to look at the parallel market. There’s still a big difference. The main factor is probably that the importers who were banned previously are still banned.”

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