The Naira appreciated against the dollar to close at N465/$1 on Monday at the black market.
Nigeria’s exchange rate at the NAFEX window appreciated remained stable at N385.67 during intraday trading on Monday, August 31, 2020. In sharp contrast, the exchange rate at the parallel market recorded a record gain on Monday as it closed at N465/$1.
Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window rose by 19% on Monday, August 31, 2020, after the gain that was recorded the previous trading day.
- Forex turnover rose from $12.09 million on Friday, August 28, 2020, to $14.37 million on Monday, August 31, 2020.
- The increase is coming after the previous trading day drop in forex turnover following dollar scarcity.
- This reinforces the continued volatility of the foreign exchange market and the scarcity of the greenback. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
- The average daily forex sale for last week was about $71.13 million which represents a significant increase from the $24 million that was recorded the previous week. The day’s FX turnover is still a far cry from the $200 million mark that was recorded sometime last week.
- Total forex trading at the NAFEX window in the month of July was $937 million compared to $875 million in June.
- The exchange rate disparity between the official NAFEX rate and the black-market rate, although recorded a significant reduction, still remained as wide as N79.33. Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window). The wide disparity between the 2 rates has created huge arbitrage opportunities for some highly connected individuals.
Market Watch
Parallel Market: At the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N465/$1 on Monday, according to information from Abokifx, a prominent FX tracking website. This represents a N12 gain when compared to the N477/$1 that it exchanged on Friday, August 28.
NAFEX: The Naira remained stable against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N385.67/$1.
- This was the same rate that it exchanged on Friday, August 28, 2020.
- The opening indicative rate was N386.50 to a dollar on Monday. This represents a 43 kobo gain when compared to the N386.93 to a dollar that was recorded on Friday.
- The N386 to a dollar is the highest rate during intraday trading before closing at N385.67. It also sold for as low as N383/$1 during intraday trading.
Forex is sold at several prices and at different times during the day.
The central bank moved towards exchange rate unification three weeks ago after it devalued the official rate to N380/$1.
The local currency had been strengthened especially in the black market as the Central Bank of Nigeria introduces some measures targeted at exporters and importers in order to try to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders.
In a circular on Thursday, CBN announced that as part of efforts to enhance the accessibility to foreign exchange, particularly by travellers, announced that it will resume gradual sales of foreign exchange to licensed Bureau De Change (BDC) operators with effect from August 31. The CBN directed the BDC operators not to resell at more than N386/$1 to the end-users.
The resumption of sales of forex to BDCs will inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
This has put a lot of pressure on currency speculators as it has put them in a panic mode to sell off their forex holdings following fears of strengthening of the naira.