Nigeria’s exchange rate at the NAFEX window remained stable at N386 during intraday trading on Wednesday, September 2, 2020. In a related development, the exchange rate at the parallel market also remained on Wednesday as it closed at N440/$1 after yesterday’s significant gain.
Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N440/$1 on Wednesday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged on Tuesday, September 1.
NAFEX: The Naira remained stable against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N386/$1.
- This was the same rate that it exchanged on Tuesday, September 1, 2020.
- The opening indicative rate was N386.08 to a dollar on Wednesday. This represents a 5 kobo drop when compared to the N386.03 to a dollar that was recorded on Tuesday.
- The N395.13 to a dollar is the highest rate during intraday trading before closing at N386. It also sold for as low as N380/$1 during intraday trading.
Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window declined by about 34% on Wednesday, September 2, 2020, after 2 consecutive days of increased turnover.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $58.46 million on Tuesday, September 1, 2020, to $38.46 million on Wednesday, September 2, 2020.
- The drop in dollar supply after 2 consecutive days of improvement reinforces the volatility of the foreign exchange market. 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 $23.19 million which represents a significant drop from the $71.13 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 2 weeks ago.
- Total forex trading at the NAFEX window in the month of August was about $857 million compared to $937 million in July.
- The exchange rate disparity between the official NAFEX rate and the black-market rate has continued to reduce significantly these past few days dropping to N54.
- The central bank moved towards exchange rate unification last month after it devalued the official rate to N380/$1.
- The local currency has been strengthened especially in the black market as the Central Bank of Nigeria introduces 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.
- 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.
- There has been a sharp drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.