Forex turnover rose by 45.5% as Nigeria’s exchange rate at the NAFEX window depreciated against the dollar to close at N385.83/$1 during intra-day trading on Wednesday, November 11.
Also, the naira depreciated against the dollar, closing at N466/$1 at the parallel market on Wednesday, November 11, 2020, as demand pressure increases in the forex market.
Parallel market: According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N466/$1 on Wednesday.
This represents a N1 drop when compared to the N465/$1 that it exchanged for on Tuesday, November 10.
- The local currency had strengthened by about 7.8% within one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers.
- This was so as to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
- The CBN has sold over $500 million to BDCs since they resumed forex sales on Monday, September 7, 2020.
- This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
- However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.
- The President of the Association of Bureau De Change Operators, Aminu Gwadebe, said he expects the impact of the extra liquidity in the market to be gradual.
- Despite the drop in speculative buying of foreign exchange, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.
NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N385.83/$1.
- This represents a 16 kobo drop when compared to the N385.67/$1 that it exchanged for on Tuesday, November 10.
- The opening indicative rate was N385.99 to a dollar on Wednesday. This also represents a 16 kobo drop when compared to the N385.83 that was recorded on Tuesday.
- The N393.43 to a dollar was the highest rate during intra-day trading before it closed at N385.83 to a dollar. It also sold for as low as N381/$1 during intraday trading.
- Forex turnover: Forex turnover at the Investor and Exporters (I&E) window rose by 45.5% on Wednesday, November 11, 2020.
- According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $140.95 million on Tuesday, November 10, 2020, to $205.05 million on Wednesday, November 11, 2020.
- The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate their funds.
- The increase in dollar supply after the previous trading day’s drop 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 $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
- Total forex trading at the NAFEX window in the month of September was about $1.98 billion, compared to $843.97 million in August.
- The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
- A financial expert and Managing Director of Financial Derivatives had stated that he expects the exchange rate at the parallel market to likely depreciate to N470-N475/$1 in November and December due to low oil prices that will further limit foreign exchange supply.