Nigeria’s exchange rate at the NAFEX window depreciated marginally closing at N385.98 during intraday trading on Tuesday, August 18, 2020. In a similar development, the exchange rate at the parallel market dropped on Tuesday as it closed at N480/$1.
Parallel Market: At the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N480/$1 on Monday, according to information from Abokifx, a prominent FX tracking website. This represents a N5 drop when compared to the N475/$1 that it exchanged on Monday, August 17.
NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N385.98/$1.
- This represents a 20 kobo drop when compared to the N385.76 rate close that was reported on the last trading day, Monday, August 17.
- The opening indicative rate was N386.03 to a dollar on Tuesday. This represents a 7 kobo gain when compared to the N386.10 to a dollar that was recorded on Monday.
- The N387.34 to a dollar is the highest rate during intraday trading before it later closed at N385.98/$1. It also sold for as low as N380/$1 during intraday trading.
Forex is sold at several prices and at different times during the day.
Forex Turnover: Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded a decline for a third consecutive day on Tuesday, August 18, 2020, as it dropped by 9% a day on day.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $20.27 million on Monday, August 17, 2020, to $18.44 million on Tuesday, August 18, 2020.
- The continuous drop in forex turnover for the day further reinforces the volatility of the foreign exchange market and the scarcity of the greenback. This is just as dollar supply has continued to remain very weak.
- The average daily forex sale for last week was about $24 million which represents a significant drop from the $50.6 million that was recorded the previous week. FX turnover for the week has not shown any sign of improvement, but rather recording lower figures and still a far cry from the over $200 million turnover that was recorded in January.
- Total forex trading at the NAFEX window in the month of July was $937 million compared to $875 million in June.
- The exchange rate disparity between the official NAFEX rate and the black-market rate has widened further to N94.02. Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window). The wide disparity between the 2 rates has created huge arbitrage opportunities for some highly connected individuals.
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The central bank moved towards exchange rate unification two weeks ago after it devalues the official rate to N380/$1.
Nairametrics had reported that due to dollar scarcity and low forex supplies, tNigerian banks have reduced dollar spending limit on naira debit cards. While some reduced it to $300, others went as low as $100. This appears to be the same measure adopted by banks during a similar situation in 2016.