FX Turnover at the NAFEX market rose 140% to $92.1 million on Thursday as liquidity poured into the official Investor & Exporter window of the CBN. Nigeria’s exchange rate at the NAFEX window depreciated at N386.25 during intraday trading on Thursday, September 3, 2020, while it remained stable at N440/$1 at the parallel market.
NAFEX: The Naira depreciated marginally against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N386.25/$1.
- This represents a 25 kobo drop when compared with the N386 to a dollar that it exchanged on Wednesday, September 2.
- The opening indicative rate was N386.48 to a dollar on Thursday. This represents a 40 kobo drop when compared to the N386.08 to a dollar that was recorded on Wednesday.
- The N387 to a dollar is the highest rate during intraday trading before closing at N386.25. It also sold for as low as N380/$1 during intraday trading.
Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window increased by about 139.7% on Thursday, September 3, 2020, after the previous trading day drop in turnover.
- According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $38.46 million on Wednesday, September 2, 2020, to $92.18 million on Thursday, September 3, 2020.
- The increased dollar supply might not be unconnected to the reported moves by the Central Bank of Nigeria to start the gradual sales of the greenback to clear demand backlog, especially for foreign investors.
- Despite improved forex supply the volatility of the foreign exchange market still persists. 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 some 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 N53.75.
Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N440/$1 on Thursday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged on Wednesday, September 2. However, forex traders on the average offered to buy dollars at an exchange rate of N425/$1 compared to N420/$1 on Tuesday.
Dollar exchange rate
Buy/Sell – 425/N420
Buy/Sell – N440/N440
- 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 at 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.
- However, the BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders as it was inadequate to meet their expenses.
- 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.
Nairametrics had reported that the CBN pumped in $50 million into the forex market, primarily for foreign investors on the spot and forward market to gauge the level of demand in the market.