The exchange rate at the parallel market remained stable closing at N465/$1 on Monday, July 14th, 2020. However, on the officially recognized NAFEX Market, the forex turnover rose by 44.4% while the exchange rate strengthened to N386/$1.
Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable as it closed at N465 to a dollar on Monday, according to information from Aboki FX a prominent FX tracking website. This was the same rate that it exchanged on Friday. However, during intraday trading, Nairametrics research observed the dollar sold for as high as N467/$ and as low as N462/$1. Nairametrics FX tracker reported a parallel market FX rate of N462/$1.
NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N386/$1, compared to the N387 that was reported on Friday, July 10, representing a N1 gain. The opening indicative rate was N387.46 to a dollar on Monday. This represents a N1.33 drop when compared to the N386.13 to a dollar that was recorded on Friday.
Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window). Nairametrics reported a few weeks ago that the government has set plans in motion to unify the multiple exchange rate in line with requirements from the World Bank. Nigeria is seeking a world bank loan of up to $3 billion. The country has been under pressure from the International Monetary Fund and the World Bank for currency reforms.
Forex Turnover
Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded an increase on Monday, July 13, 2020, as it rose by 44.4% day on day. According to the data tracked by Nairametrics, forex turnover rose from $25.17 million on Friday, July 10, 2020, to $36.28 million on Monday, July 13, 2020. The turnover which is still low is an indication of the liquidity pressure in the foreign exchange market and a far cry from an average of $200 million recorded at major trading days during the last few weeks.
Rate Adjustment
Nairametrics reported last week that the CBN official rate has been adjusted from N360 to a dollar to N381 at its SMIS window where forex is sold to importers and SME’s. According to Bloomberg, “Nigeria quietly devalued its official exchange rate last week, a nod to IMF suggestions that foreign investors would appreciate the unification of a currency that has traded at multiple rates for five years. In the event, the handling of the 5.5% devaluation of N381 per dollar still served to sow confusion. The Central bank hasn’t announced the change and is yet to adjust the rate on its website.’’
Nairametrics had earlier reported that the Central Bank of Nigeria (CBN), directed all authorized dealers to immediately stop the processing of Form M for importers of maize in the country. This latest directive was contained in a notice that was addressed to authorized dealers by the apex bank.
This is seen as part of measures by CBN to manage and control the demand of the scarce foreign exchange thereby reducing the pressure on the country’s external reserve. This new import restriction is an addition to the 41 items which had been ban by the apex bank some years ago from assessing foreign exchange through the official window.
According to a monitored report on Bloomberg, ‘’The naira should be between N427 and N491 to a dollar, converging with the black market rate. It could depreciate even more if the unofficial rate weakens further and when the central bank lifts restrictions on access to dollars, which has created a hard currency shortage hurting local importers.’’
Forex News: On Monday, the Central Bank of Nigeria (CBN) has directed all authorised dealers to immediately discontinue the processing of Forms M for maize/corn importation into the country. This directive is contained in a notice that was addressed to authorised dealers and signed by Dr O.S Nnaji, CBN’s Director in charge of Trade and Exchange Department.
