Secondary market of Iran's Forex likely to be abandoned - analyst

Tehran, Iran, Oct.11

Trend:

It is expected that the secondary market of Iran's Forex will be abandoned in the near future, capital market expert Homayoun Darabi told Trend.

In tcase of integrated Iranian FX platform aka “Nima” and other currency structures, Homayoun Darabi said that unfortunately, Iran's administration has a disproportionate tendency towards centralized governance.

The same approach is used in the exchange market, he said.

The integrated Iranian FX platform, aka “NIMA”, aiming to facilitate the currency trades for market participants.

In August, the Central Bank of Iran (CBI) introduced a secondary market known by its Persian acronym NIMA.

Exporters — including petrochemical companies — of commodities categorized as “non-oil products” are supposed to offer foreign currency generated from exports in NIMA for importers to buy at mutually agreed rates. Before the test launch of NIMA, petrochemical companies had to sell their foreign currency earnings to the Central Bank at the official exchange rate.

NIMA was established to give the CBI a chance to track the flow of foreign currency among exporters, importers, banks and trading offices.

“At the beginning of the year, the government, with the official US dollar rate at 4200 rial, tried to neglect the free market competition. Every transactions outside of the banks were banned, and currency exchange traders were shut down,” he said.

In such situation, the black market has emerged, Darabi said.

Referring to the impact of secondary market on imports, he said, after this decision, a huge demand for imports was made, many importers, who were granted the access of secondary market`s exchange rate, sold their currencies, or released their imported goods to market at black market`s currency rate.

“After failure of the centralized governance function, the government tried to replace the secondary market called “NIMA”, which introduced neither a centralized government currency rate nor a black market rate, but a moderate one,” he explained.

Comparing the past and present currency decisions in Iran, he said, this method was experimented as the form of "exchange trading center", during president Mahmoud Ahmadinejad`s administration which was practically not efficient, and today the currency rate at the black market is twice the rate in NIMA and five times higher than the government currency rate.

“The failure of secondary FOREX market indicates that these methods cannot replace the competition in the form of free markets to explore the currency rate, and it is expected that this method will be abandoned in the near future,” the analyst concluded.

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