Nigeria’s exchange rate at the NAFEX window appreciated to N388 during intraday trading on Monday, August 3, 2020. In a similar situation, the exchange rate at the parallel market appreciated on Monday as well to close at N473/$1.
Cumulative forex turnover for the month of July was $937 million compared to $875 million in June.
Parallel Market: At the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N473/$1 on Monday, according to information from Abokifx, a prominent FX tracking website. This represents a N2 gain when compared to the N475/$1 that it exchanged on Wednesday, July 29. Some traders contacted by Nairametrics research also confirmed the price as N480/$1.
However, due to the 2 day Sallah holidays, Nairametrics research reported that the naira exchanged for as high as N485 to a dollar on Friday, July 31.
NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N388/$1. This represents a N1.25 gain when compared to the N389.25 rate close that was reported on the last trading day, Wednesday, July 29. The opening indicative rate was N388.33 to a dollar on Monday. This represents a 28 kobo gain when compared to the N388.61 to a dollar that was recorded on Wednesday.
The naira fell to as high as N390 during intraday trading before strengthening to the closed rate of N388. It also sold for as low as N380/$1 during intraday trading. Forex is sold at several prices during the day.
Forex Turnover: Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded a decline on Monday, August 3, 2020, as it dropped by 8.5% day on day. According to the data tracked by Nairametrics from FMDQ, forex turnover decreased from $18.83 million on Wednesday, July 29, 2020, to as low as $17.23 million on Monday, August 3, 2020.
The average forex sale for last week was a low volume of about $32 million which is slightly better than the $27 million that was recorded the previous week. We also noted that on no day last week did we record a sale close to or above $50 million. FX turnover which was subdued last week did not show any sign of recovery as Nigeria finished the two-day Sallah holiday.
Total forex trading at the NAFEX window in the month of July was $937 million compared to $875 million in June.
Exchange rate disparity
The exchange rate disparity between the official NAFEX rate and the black-market rate remained wide on Monday staying as wide as N85. Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window).
Exchange rate unification remains on the cards and yet to be implemented weeks after the central bank governor confirmed it will be executed.
The minister of Finance also admitted that Nigeria was seeking unification of its forex Windows, a move thought to be in line with the 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.
Nigeria’s airspace remains closed to commercial international flight operations and won’t be open till October 2020. Foreign Travel has often been a source of demand for the greenback.
- The recent demand for dollars at the parallel market is thought to be fueled by speculators.
- The parallel market also caters to forex trades through wire transfers especially for buyers who cannot fulfil their dollar demands at the I&E window or the SMIS window.
- The exchange rate for wired transfer is often at a premium to the black market rate.
Forex Challenges: Last few weeks have been most challenging for the foreign exchange market as it witnessed very low liquidity. The downward slide against the greenback and some other major currencies continued this week due to tightened liquidity in the system.