Earlier this morning (Monday, May 4th, 2020), the naira was selling at NGN430 per US dollar in the parallel market, according to Everdon Bureau de Change. This marks a significant reduction in the exchange rate when compared to N465 per dollar that was recorded last week.
Recall that naira has been under pressure in recent weeks, due to a number of factors including the oil price/demand crisis, Nigeria’s depleting foreign reserves, and a growing backlog of dollar demands. However, the Central Bank of Nigeria (CBN) announced last week that it would restart dollar sales to those who urgently need them.
As Nairametrics reported, the apex bank informed Nigerians that following the expected gradual easing of the Coronavirus lockdown, that it will resume the provision of Forex to all commercial banks in Nigeria for onward sales to SMEs who need dollars for essential imports, as well as students who need to pay their school fees in foreign universities. Other categories of dollar users are also expected to benefit from the commencement of the dollar sales which began today.
Note that Nigeria’s foreign reserves dropped to about USD33.44 billion as at 30th April 2020. Meanwhile, the American Dollar Index, which tracks it against a basket of major currencies, climbed up to 0.27% to 99.45 by 6.30 am Nigerian time, as China and the USA began a battle of words over the origin of the COVID-19.
Deutsche Bank currency strategist, George Caravels, explained to CNBC that the Americans plan to impose capital controls on the Chinese would be dollar-negative, as such a decision will mean massive outflows from dollar-denominated assets.