Nigeria’s exchange rate at the NAFEX window depreciated to N386.17 during intraday trading on Thursday, September 10, 2020. Also, the naira depreciated to N455/$1 at the parallel market, despite the sales of another tranche of over $50 million to over 5,000 BDC operators by the Central Bank of Nigeria.
Parallel Market: At the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N455/$1 on Thursday, according to information from Abokifx, a prominent FX tracking website. This represents a N10 drop when compared to the N445 that it exchanged on Wednesday, September 9.
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Currency Developments
- The local currency has strengthened by about 7.8% within the last one week 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 on Monday, September 7, 2020, is expected to 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.
- Some forex traders monitored during the week appear to hoard forex as they anticipated further depreciation in the market.
- 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.
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NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N386.17/$1.
- This represents a 17 kobo drop when compared with the N386 to a dollar that it exchanged on Wednesday, September 9.
- The opening indicative rate was N386.57 to a dollar on Thursday. This represents an 11 kobo drop when compared to the N386.46 to a dollar that was recorded on Wednesday.
- The N394.13 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.
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Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window declined by about 23.8% on Thursday, September 10, 2020. This drop is a reversal of the improved turnover that was recorded last week.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $40.43 million on Wednesday, September 9, 2020, to $30.8 million on Thursday, September 10, 2020.
- The Central Bank of Nigeria (CBN) is still battling to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
- The decline in forex turnover after yesterday’s increase 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 turnover volumes on the spot market, which is largely quoted at the investors and exporters window, have been on the decline due to lack of foreign inflow and inadequate CBN intervention.
- The average daily forex sale for last week was about $58.52 million which represents a significant improvement from the $23.19 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 remained as wide as N68.83