Forex turnover at the Investor and Exporters window rose 315% on Wednesday providing a semblance of a boost to liquidity in the foreign exchange market. This is according to data from the FMDQOTC, an exchange where forex is traded by foreign investors and exporters.
According to the data tracked by Nairametrics, forex turnover rose from $16.06 million on Wednesday compared to $66.61 million on Thursday representing a 315% increase day on day. While the increase in percentage terms appears to be a high, daily turnover of $66.6 million is still far from the over $200 million recorded in January 2020.
Although the liquidity in the foreign exchange market appears to have improved, the volatility and uncertainty of the market remain, particularly due to liquidity shortages across markets. Liquidity remains quite tight in the foreign exchange market with the average turnover in the I&E market is significantly down to about $45.5 million in the month of May compared to $297.5 million that was recorded in January.
Several reports tracked by Nairametrics indicate the pent up demand for forex in the market could be between $1.5 -$5 billion as supply shortages persist. Forex shortages have persisted since the crash in oil prices coincided with the worldwide lockdown due to Covid-19. The rise in demand and contrasting fall in supply has called for another round of devaluation which the CBN has insisted it has to plans to implement. A devaluation last occurred in March. Speculators have thus throned to the black market widening the disparity between it and the I&E window.
In related news, the exchange rate on the I&E window appreciated marginally on Thursday closing at N385.70/$1 compared to N386/$1 reported on Wednesday, June 17th, representing a 30 kobo gain. The stability of the naira in the foreign exchange market continues today, as the local currency was marginally strengthened at the Investors and Exporters (I&E) window.
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At the black market where forex is traded unofficially, the exchange rate between the naira and dollar depreciated by N1 to close at N453 on Thursday. The rate at the start of the week was N450/$1.
Nigeria continues to maintain multiple exchange rates comprising of the CBN official rate, the BDC rates, and the I&E window. Nairametrics reported earlier in the week that the government is mulling unifying the multiple exchange rates in a bid to increase the amount available for state governments to share.