Nigeria’s exchange rate at the NAFEX window appreciated marginally closing at N385.67 during intraday trading on Friday, August 28, 2020. In another development, the exchange rate at the parallel market still remained stable on Friday as it closed at N477/$1.
Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window declined substantially by 72% on Friday, August 28, 2020, after the gain that was recorded the previous trading day.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $43.16 million on Thursday, August 27, 2020, to $12.09 million on Friday, August 28, 2020.
- The decline is coming a day after the previous trading day increase in forex turnover following improved dollar supply.
- This reinforces the continued volatility of the foreign exchange market and the scarcity of the greenback. The supply of dollars has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
- The average daily forex sale for last week was about $71.13 million which represents a significant increase from the $24 million that was recorded the previous week. The day’s FX turnover is still a far cry from the $200 million mark that was recorded sometime last week.
- 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 remained as wide as N91.33. 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.
Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N477/$1 on Friday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged on Thursday, August 27.
NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N385.67/$1.
- This represents an 8 kobo gain when compared to the N386.75/$1 that it exchanged the previous trading day, Thursday, August 27, 2020.
- The opening indicative rate was N386.93 to a dollar on Friday. This represents a 78 kobo drop when compared to the N386.15 to a dollar that was recorded on Thursday.
- The N386 to a dollar is the highest rate during intraday trading before closing at N385.67. 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.
The central bank moved towards exchange rate unification three weeks ago after it devalued the official rate to N380/$1.
Despite the volatility and scarcity of foreign exchange, the Naira appears stable across the forex markets. The dollar shortage has forced banks to reduce drastically the dollar spending limits on their debit cards.
The local currency has remained stable for some days as the Central Bank of Nigeria had introduced some measures targeted at exporters and importers in order to try to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders.
Nairametrics had reported that the CBN, in a circular on Thursday, announced that as part of efforts to enhance the accessibility to foreign exchange, particularly by travellers, announced that it will resume gradual sales of foreign exchange to licensed Bureau De Change (BDC) operators with effect from August 31. The CBN directed the BDC operators not to resell at more than N386/$1 to the end-users.
The resumption of sales of forex to BDCs will inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.