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Currencies

CBN Governor confirms exchange rate unification plans  

He revealed the unification will also be around the NAFEX rate.

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Banks' stakeholders express 4 main concerns bothering the sector right now, CBN, MARKET UPDATE: CBN’s historic agriculture lending; Is it yielding the desired results? 

The Governor of the Central Bank, Godwin Emefiele, has confirmed that the CBN will continue to pursue unification around its Nafex rate. The NAFEX rate is the forex window where Investors and Exporters transact dollars on market-determined prices.  

The CBN Governor said this at an Investors Conference with the Federal Government of Nigeria by CitiBank. The conference which was held online was titled COVID-19. Economic and Budgetary Update. Nairametrics listened in on the Conference.   

 Nigeria was represented by the following government officials; 

  • Zainab S. Ahmed – Finance Minister
  • Godwin Emefiele – CBN Governor
  • Patience Oniha – DG DMO
  • Ben Akabueze – DG Budget Office
  • And a representative of the Hon. Minister of Health.

According to Godwin Emefiele, “We will continue to pursue unification around the NAFEX Market”. The CBN Governor also mentioned that as at December 2019 Nigeria saw a “relatively stable market because the NAFEX rate and rate that the Central Bank does transaction outside the NAFEX was close to themselves.” And that “at some point, the NAFEX rate me below the Central Bank rate” 

Nairametrics was first to report last week that the government was considering a unification of the exchange rate and could unify the rate around the NAFEX (I&E) window rate or the official CBN rate of N360/$1. The latest comment from the CBN Governor suggests they might be unifying along the lines of NAFEX. 

Mr. Emefiele also commented on the disparity between the parallel market and the NAFEX rate claiming it is a market for people who are “doing dealings that are not recognized by authorities”

According to Emefiele, ”The CBN has always maintained that the black market is not a good determinant of the value of the naira. You’ll find that people who are in a hurry and do not want to procure the kind of documentation required, will sometimes rush to those markets. But we have used the period of this pandemic to prove that anybody dealing in that market is dealing in an illegal business.” 

READ ALSO: More pressure on the naira as Diaspora remittances to drop by 20%

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He also claimed that the COVID-19 pandemic has buttressed claims from the bank that most of the pent-up demand was not realistic. He cited the impact of the global lockdown on flights as a clear example. “These airlines are not flying and sometimes you find dollars being sold through the BDC’s into that market just to be seen that we are doing everything possible to moderate the rate,” Emefiele said.

He continues that because “airlines are not flying, and people are not traveling so there should therefore not be any demand for forex exchange in that market”.

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Insisting that the trades in the black market are counterintuitive he went further to accuse those trading in the black market as those dealing in corrupt practices. “It could only be those who are dealing in what is simply called corrupt practices that will be dealing in that market and we are not about to talk about unification of our exchange rate around people who are dealing illegally,” Emefiele added.

He also claimed anyone who was willing to deal in forex should utilize the “recognized” NAFEX market which is why “unification will have to be around the NAFEX”

The Federal Government disclosed plans to unify the exchange rate in order to generate more revenue and manage the rate in a sustainable manner. TheIMF had previously pointed out that unifying the exchange rate will impact the economy more positively than the multiple exchange rates, which creates a lot of opportunities for arbitrage. The unification also curtails situations where public and private sector decisions are distorted as a result of uncertainties.  

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READ MORE: CBN debits banks N216.1 billion for CRR compliance

The CBN Governor also responded to questions about lack of liquidity in the NAFEX window which Nairametrics reports averages between $4-60 million daily. In response to how the backlogs will be alleviated, he said that “the external reserve still remains about 36 sic ($36 billion) and will imagine it is enough to make somebody do business in Nigeria.”

The CBN also attacked claims about higher dollar demands citing the shut down of manufacturing in the country as an example. “When somebody comes today to tell us they want to open fresh LC (Letter of Credit) we begin to wonder the motive behind that” he chided. The CBN Governor also claimed maturing obligations will be honored and that “we the CBN….stands ready to ensure that where there is shortage of FX in the market where the banks cannot find FX to meet those obligations we will come in to support the market and that we do from time to time.”

READ MORE: Nigeria’s external reserve drop by $261 million in 15 days, oil firms to sell forex to CBN 

The CBN Governor also tried to calm fray nerves explaining that some of the dollar demands were also from foreign investors and some people who wanted to “front load” their dollar demands, that they do so in an “orderly fashion” and that they will be paid their money claiming Nigeria met all demand for those who were patient in 2016 when Nigeria was in a similar FX crisis.

Upshots: It is unclear what impact Mr. Emefiele’s remark will have on the market as most market analysts who spoke to Nairametrics on the condition of anonymity have a different view. They insist there is legitimate pent up demand of up to $5 billion as liquidity shortages continue to affect the NAFEX market. However, these claims have not been substantiated as there is no official record or data where demand is published.

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This session was organized to help calm the nerves of foreign investors now awash with bailout dollars but worried about Nigeria’s faltering economy and its likely ability to trigger further devaluation. Mr. Emefiele did not confirm if another devaluation was in the offing.

 

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    Currencies

    Naira remains stable across forex market as dollar supply improves significantly by 430%

    Naira remained stable against the US Dollar at the NAFEX window on Thursday to close at N410.50/$1.

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    Naira value

    Thursday,15th April 2021: The exchange rate between Naira and the US Dollar closed at N410.50/1$ in the Importers and Exporters window, where forex is traded officially.

    Naira remained stable against the US Dollar at the NAFEX window on Thursday to close at N410.50/$1 as there was no movement when compared to the rate that was recorded on Wednesday, as dollar supply improves significantly by about 430%.

    Also, the naira remained stable against the dollar for the third day at the parallel market on Thursday, 15th April 2021 to close at N482 to a dollar, the same rate that was recorded on Wednesday, April 14, 2021.

    READ: Nigeria’s external reserve drop by $261 million in 15 days, oil firms to sell forex to CBN 

    Trading at the official NAFEX window

    Naira remained stable against the US Dollar at the Investors and Exporters window on Thursday to close at N410.50 to a dollar. This was the same rate that was recorded on Wednesday, 14th April 2021.

    • The opening indicative rate closed at N410.50 to a dollar on Thursday. This represents an 86 kobo drop when compared to N409.64/$1 recorded on Wednesday.
    • Also, an exchange rate of N437.62 to a dollar was the highest rate recorded during intra-day trading before it closed at N410.50/$1. It also sold for as low as N392/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window rose significantly by 429.93% on Thursday, 15th April 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover increased from $21.92 million recorded on Wednesday, April 14, 2021, to $116.16 million on Thursday, April 15, 2021.

    READ: Naira gains at NAFEX as oil prices record biggest single day loss in 11 months

    Cryptocurrency watch

    The world’s most popular digital currency, Bitcoin, went up by over 1% to close at $63,441 on Thursday evening as most investors still think it is a bubble.

    • Bitcoin had crossed the $64,000 mark on Wednesday after it traded past the $63,000 mark the previous day for the first time.
    • The Co-Founder and Managing Director of Nexo, Antoni Trenchev, had said that Bitcoin could hit $100,000 in the next 12 to 18 months.

    Oil price gain

    Brent crude oil price went up slightly on Thursday to close at $66.83 per barrel, indicating a 0.3% increase compared to $66.63 recorded at the close of trade on Wednesday as it trades at a one-month high.

    Sigma Pensions
    • Oil extended its climb out of a month-long trading range with further signs of an accelerating rebound taking shape in the U.S.
    • Oil remains firmly above its most recent trading range, where it had been stuck near $60 a barrel since mid-March as some regions faced a resurgence in virus cases. Continued signs of a stronger U.S. market are also pushing prices higher.
    • Brent Crude closed at $66.83 (+0.38%), WTI Crude closed at $63.46 indicating 0.49% gain, Bonny Light, $64.79 (+3.56%), OPEC Basket (+2.46%) to close at $63.39 while Natural gas rose by 1.53% to close at $2,658

    READ: Nigeria’s external reserve drop by $261 million in 15 days, oil firms to sell forex to CBN 

    External reserve

    Nigeria’s external reserve gained about $27 million on Wednesday, 14th April 2021 to close at $35.199 billion, being the highest external reserve position recorded in over a month.

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    • This indicates a 0.08% increase when compared to $35.172 billion recorded on Tuesday, 13th April 2021.
    • It also represents an increase in the country’s external reserve position for the 17th consecutive day, having endured a significant downturn earlier in the year. Nigeria’s reserve has added a total of about $783 million in 17 days.
    • This recent increase in Nigeria’s external reserve could however be attributed to the increase in crude oil prices recorded earlier in March before the recent bearish trade in the crude market.
    • It could be attributed to the possible increase in diaspora remittance as the CBN offers incentives for every unit of a dollar received in Nigeria from diaspora remittance.
    • The external reserve is likely to get a further boost, as the Federal Government recently announced plans to issue $500 million Eurobonds for 2021.

    Continue Reading

    Currencies

    Naira appreciates at NAFEX as CBN sells forex to foreign investors, first in 2021

    Naira appreciated against the US Dollar at the NAFEX window on Wednesday to close at N410.50/$1.

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    on

    Wednesday,14th April 2021: The exchange rate between Naira and the US Dollar closed at N410.50/1$ in the Importers and Exporters window, where forex is traded officially.

    Naira appreciated against the US Dollar at the NAFEX window on Wednesday to close at N410.50/$1. This represents a 0.12% gain when compared to N411/$1 recorded on Tuesday, as the Central Bank of Nigeria in its first sale, in 2021, to foreign investors seeking to repatriate their funds abroad, sold $20 million to them according to Reuters.

    Meanwhile, the naira remained stable against the dollar for the second day at the parallel market on Wednesday, 14th April 2021 to close at N482 to a dollar, the same rate that was recorded on Tuesday, April 13, 2021.

    READ: Naira falls at NAFEX window as Bitcoin rises above $63,000, an all-time record high

    Trading at the official NAFEX window

    Naira appreciated against the US Dollar at the Investors and Exporters window on Wednesday to close at N410.50 to a dollar. This represents a 50 kobo gain when compared to N411/$1 recorded on Tuesday, 13th April 2021.

    • The opening indicative rate closed at N409.64 to a dollar on Wednesday. This represents a 6 kobo drop when compared to N409.58/$1 recorded on Tuesday.
    • Also, an exchange rate of N422 to a dollar was the highest rate recorded during intra-day trading before it closed at N409.64/$1. It also sold for as low as N392/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window dropped significantly by 59.05% on Wednesday, 14th April 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover declined from $53.53 million recorded on Tuesday, April 13, 2021, to $21.92 million on Wednesday, April 14, 2021.

    READ: Naira gains at NAFEX window despite 26.2% drop in dollar supply

    Cryptocurrency watch

    The world’s most popular digital currency, bitcoin, reached another all-time high on Wednesday, touching $64,717.01 before coming down to $62,298.51 as of Wednesday evening ahead of Coinbase’s historic stock market listing in New York.

    • Bitcoin, which has been up and down over the last few weeks, crossed $64,000 on Wednesday after it had just yesterday, crossed the $63,000 mark for the first time.
    • The rally has come in anticipation of cryptocurrency exchange Coinbase’s hotly tipped US stock market listing.
    • Earlier on Wednesday, the price of Dogecoin, recorded a new milestone as it went up by 54%, establishing a new all-time high of $0.1161.
    • Meanwhile, Coinbase, a Cryptocurrency exchange, finally made its highly anticipated debut on Nasdaq on Wednesday, April 14, 2021, becoming the first company devoted entirely to cryptocurrency to enter the US stock exchange with a $100 billion valuation.

    READ: Naira remains flat as external reserve fall to just 6 months of imports

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    Oil price gain

    Brent crude oil price jumped on Wednesday to close at $66.63 per barrel, indicating a 3.98% increase compared to $64.08 recorded at the close of trade on Tuesday as the Energy Information Administration (EIA) reports crude draw.

    • The EIA in its report said that crude oil inventories had shed 5.9 million barrels in the week to April 9, compared with an inventory draw of 3.5 million barrels reported for the previous week.
    • The EIA’s inventory estimate comes a day after the American Petroleum Institute reported a 3.6-million-barrel inventory draw in crude oil for the same period but a 5.565-million-barrel build in gasoline stocks, which prevented oil prices from swinging significantly up or down.
    • The oil rally can also be attributable to the picking up of US oil demand as economic expansion quickens. The West Texas Intermediate (WTI) crude futures surged more than 5% on Wednesday and broke out the narrow trading range they had been stuck in since mid-March.
    • Morgan Stanley, meanwhile, said in a new note that it expected prices to remain range-bound through the end of the summer, at between $65 and $70 per barrel for Brent.
    • Brent Crude closed at $66.63 (+4.65%), WTI Crude closed at $63.18 indicating 4.99% gain, Bonny Light, $62.56 (+0.58%), OPEC Basket (+0.67%) to close at $61.87 while Natural gas declined by 0.08% to close at $2,617

    External reserve

    Nigeria’s external reserve gained about $34 million on Tuesday, 13th April 2021 to close at $35.172 billion, being the highest external reserve position recorded in over a month.

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    • This indicates a 0.1% increase when compared to $35.138 billion recorded on Monday, 12th April 2021.
    • It also represents an increase in the country’s external reserve position for the 16th consecutive day, having endured a significant downturn earlier in the year. Nigeria’s reserve has added a total of about $756 million in 16 days.
    • This recent increase in Nigeria’s external reserve could however be attributed to the increase in crude oil prices recorded earlier in March before the recent bearish trade in the crude market.
    • It could be attributed to the possible increase in diaspora remittance as the CBN offers incentives for every unit of a dollar received in Nigeria from diaspora remittance.
    • The external reserve is likely to get a further boost, as the Federal Government recently announced plans to issue $500 million Eurobonds for 2021.

    Continue Reading

      





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