Question
(a) This partial content of the article was published in Nairametrics by Olumide Adesina in March 27, 2020. CBN cracks down on currency speculators Nigerian
(a) This partial content of the article was published in Nairametrics by Olumide Adesina in March 27, 2020. CBN cracks down on currency speculators Nigerian currency traders are refusing to show rates to sell the U.S. dollar after the Central Bank of Nigeria (CBN) last week vowed to crack down on speculators in a bid to stop the Naira from depreciating, traders said yesterday. The CBN recently announced it was collaborating with the Nigerian Financial Intelligence Unit (NFIU) to uncover speculation and would charge such dealers for economic sabotage. The bank added that market fundamentals did not support devaluation. Traders were willing to buy dollars between N368 and N370 on the OTC Market but there were no sellers, as liquidity was tight and traders were weighing CBNs threat
Required: (i) From the above article, a stern policy was implemented by CBN as a tool of defense against devaluation of Naira (NGN) to curb currency speculation activities that had affected currency traders in Nigeria. Traditional thinking, a speculation is a term of ill repute. However, speculation can actually serve a very useful purpose. Explain FOUR (4) benefits of speculation to the economy. (8 marks)
(ii) Distinguish the roles of a speculator and an arbitrageur in the foreign exchange market. (4 marks)
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