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Currencies

CBN Governor alleges parallel market used for bribes and corruption

Emefiele has said that the parallel market is a tainted market where illegal foreign exchange transactions take place.

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parallel market, Covid-19: N3.5 trillion disbursed as stimulus package for the Nigerian economy, CBN Vs NESG: Waving the white flag for the benefit of Nigerians, Exchange Rate Unification: CBN devalues official rate to N380/$1, Nigerian banks have written off N1.9 trillion impaired loans in past 4 years, CBN sandbox operations, Stirling Trust Company Limited, Key highlights of the October 2020 Business Expectations Survey Report, A Total of N3.5 trillion was disbursed in the wake of the COVID-19 pandemic, in addition to several other interventions to reflate the economy - CBN, BOFIA 2020: Steps forward or backwards for Nigerian banks, Total credit to the economy rose to N19.54trillion – CBN Governor

The Governor of Central Bank of Nigeria (CBN), Godwin Emefiele, railed off against the parallel market alleging that it is a tainted market where illegal foreign exchange transactions, which include sourcing of forex cash for purposes of offering bribes and other corrupt activities, take place.

While disclosing that the parallel market is no more than 5% of the forex market, Emefiele said that Nigeria’s official exchange rate should not be determined by the rate in that market where the naira has weakened to a 3-month low.

READ: Mysterious Bitcoin whale moves 15,022 BTCs worth $162 million

This was disclosed by Emefiele, on Tuesday, November 24, 2020, during a virtual briefing in Abuja after the Monetary Policy Committee meeting.

The CBN Governor expressed his disappointment and frustration at the rhetoric of some analysts who say that the parallel market rate of N480/$1 is the exchange rate.

READ: Nigeria imported N1.28 trillion “used vehicles”, motorcycle in one year, up by 42%

What he said

Emefiele, in his briefing, said, “And indeed I heard some analysts talking about the parallel market saying that exchange rate is at N480. I want to say this, that it is unfortunate and really unfair that even analysts who are supposed to know will play with numbers and begin to determine the exchange rate of our currency using parallel market rate.

“For the information of everybody, parallel market as far as we know it and the data that we have, is a shallow market in Nigeria with no more than 5% of market share. Parallel market and quote me is a tainted market in Nigeria, where people who desire to deal in illegal foreign exchange transactions including sourcing of FX cash for purposes of offering bribes, corruption, that is where they deal.

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“And that is where people who are supposed to understand the implication of these on the economic activities on our country begin to go to television and begin to say our exchange rate is N480. This very unfortunate,” he added.

READ: Naira remains stable at the forex market as NAFEX market turnover drop by 59% 

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What we know

Whilst forex is obviously a conduit for illegal transactions, it cannot be attributed alone to the parallel market. Illegal transactions disguised as legal also take place in the official market.

Suffice to add that the central bank shares most of the blame in the huge exchange rate disparity between the official and parallel market rates due to some of its policies. For example, there are restrictions on third party transfer of forex from one account to another while importers have limited room to source forex.

READ: Seplat announces exchange rate of N385.78/$1 in payment of its interim dividend

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Forex illiquidity in the official market also means most businesses have no option but to source forex in the parallel market where it cost more. Not doing so means they won’t be able to meet their obligations such as servicing loans in forex, paying suppliers and honouring technical contracts.

Disparity widens

According to data from abokifx.com, the naira exchange stood at N483/$1 on Tuesday at the parallel market, whereas it closed at N385.50/$1 on Tuesday at the investors and exporters window, according to data from FMDQ. The official CBN rate still remains N379/$1.

The exchange rate disparity keeps widening as demand pressure increases at the parallel market on account of low dollar supply.

Forex scarcity and some of CBN’s policies like those on export proceeds, barring of third parties from buying forex routed through Form M and others, have seen importers and manufacturers move to the parallel market to meet part of their demands.

Explore Data on the Nairametrics Research Website

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Chike Olisah is a graduate of accountancy with over 15 years working experience in the financial service sector. He has worked in research and marketing departments of three top commercial banks. Chike is a senior member of the Nairametrics Editorial Team. You may contact him via his email- [email protected]

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    Currencies

    Naira remains stable across forex market as dollar supply improves significantly by 430%

    Naira remained stable against the US Dollar at the NAFEX window on Thursday to close at N410.50/$1.

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    Naira value

    Thursday,15th April 2021: The exchange rate between Naira and the US Dollar closed at N410.50/1$ in the Importers and Exporters window, where forex is traded officially.

    Naira remained stable against the US Dollar at the NAFEX window on Thursday to close at N410.50/$1 as there was no movement when compared to the rate that was recorded on Wednesday, as dollar supply improves significantly by about 430%.

    Also, the naira remained stable against the dollar for the third day at the parallel market on Thursday, 15th April 2021 to close at N482 to a dollar, the same rate that was recorded on Wednesday, April 14, 2021.

    Trading at the official NAFEX window

    Naira remained stable against the US Dollar at the Investors and Exporters window on Thursday to close at N410.50 to a dollar. This was the same rate that was recorded on Wednesday, 14th April 2021.

    • The opening indicative rate closed at N410.50 to a dollar on Thursday. This represents an 86 kobo drop when compared to N409.64/$1 recorded on Wednesday.
    • Also, an exchange rate of N437.62 to a dollar was the highest rate recorded during intra-day trading before it closed at N410.50/$1. It also sold for as low as N392/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window rose significantly by 429.93% on Thursday, 15th April 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover increased from $21.92 million recorded on Wednesday, April 14, 2021, to $116.16 million on Thursday, April 15, 2021.

    Cryptocurrency watch

    The world’s most popular digital currency, Bitcoin, went up by over 1% to close at $63,441 on Thursday evening as most investors still think it is a bubble.

    • Bitcoin had crossed the $64,000 mark on Wednesday after it traded past the $63,000 mark the previous day for the first time.
    • The Co-Founder and Managing Director of Nexo, Antoni Trenchev, had said that Bitcoin could hit $100,000 in the next 12 to 18 months.

    Oil price gain

    Brent crude oil price went up slightly on Thursday to close at $66.83 per barrel, indicating a 0.3% increase compared to $66.63 recorded at the close of trade on Wednesday as it trades at a one-month high.

    • Oil extended its climb out of a month-long trading range with further signs of an accelerating rebound taking shape in the U.S.
    • Oil remains firmly above its most recent trading range, where it had been stuck near $60 a barrel since mid-March as some regions faced a resurgence in virus cases. Continued signs of a stronger U.S. market are also pushing prices higher.
    • Brent Crude closed at $66.83 (+0.38%), WTI Crude closed at $63.46 indicating 0.49% gain, Bonny Light, $64.79 (+3.56%), OPEC Basket (+2.46%) to close at $63.39 while Natural gas rose by 1.53% to close at $2,658

    External reserve

    Nigeria’s external reserve gained about $27 million on Wednesday, 14th April 2021 to close at $35.199 billion, being the highest external reserve position recorded in over a month.

    • This indicates a 0.08% increase when compared to $35.172 billion recorded on Tuesday, 13th April 2021.
    • It also represents an increase in the country’s external reserve position for the 17th consecutive day, having endured a significant downturn earlier in the year. Nigeria’s reserve has added a total of about $783 million in 17 days.
    • This recent increase in Nigeria’s external reserve could however be attributed to the increase in crude oil prices recorded earlier in March before the recent bearish trade in the crude market.
    • It could be attributed to the possible increase in diaspora remittance as the CBN offers incentives for every unit of a dollar received in Nigeria from diaspora remittance.
    • The external reserve is likely to get a further boost, as the Federal Government recently announced plans to issue $500 million Eurobonds for 2021.

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    Currencies

    Naira appreciates at NAFEX as CBN sells forex to foreign investors, first in 2021

    Naira appreciated against the US Dollar at the NAFEX window on Wednesday to close at N410.50/$1.

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    Wednesday,14th April 2021: The exchange rate between Naira and the US Dollar closed at N410.50/1$ in the Importers and Exporters window, where forex is traded officially.

    Naira appreciated against the US Dollar at the NAFEX window on Wednesday to close at N410.50/$1. This represents a 0.12% gain when compared to N411/$1 recorded on Tuesday, as the Central Bank of Nigeria in its first sale, in 2021, to foreign investors seeking to repatriate their funds abroad, sold $20 million to them according to Reuters.

    Meanwhile, the naira remained stable against the dollar for the second day at the parallel market on Wednesday, 14th April 2021 to close at N482 to a dollar, the same rate that was recorded on Tuesday, April 13, 2021.

    READ: Naira falls at NAFEX window as Bitcoin rises above $63,000, an all-time record high

    Trading at the official NAFEX window

    Naira appreciated against the US Dollar at the Investors and Exporters window on Wednesday to close at N410.50 to a dollar. This represents a 50 kobo gain when compared to N411/$1 recorded on Tuesday, 13th April 2021.

    • The opening indicative rate closed at N409.64 to a dollar on Wednesday. This represents a 6 kobo drop when compared to N409.58/$1 recorded on Tuesday.
    • Also, an exchange rate of N422 to a dollar was the highest rate recorded during intra-day trading before it closed at N409.64/$1. It also sold for as low as N392/$1 during intra-day trading.
    • Forex turnover at the Investor and Exporters (I&E) window dropped significantly by 59.05% on Wednesday, 14th April 2021.
    • A cursory look at the data tracked by Nairametrics from FMDQ showed that forex turnover declined from $53.53 million recorded on Tuesday, April 13, 2021, to $21.92 million on Wednesday, April 14, 2021.

    READ: Naira gains at NAFEX window despite 26.2% drop in dollar supply

    Cryptocurrency watch

    The world’s most popular digital currency, bitcoin, reached another all-time high on Wednesday, touching $64,717.01 before coming down to $62,298.51 as of Wednesday evening ahead of Coinbase’s historic stock market listing in New York.

    • Bitcoin, which has been up and down over the last few weeks, crossed $64,000 on Wednesday after it had just yesterday, crossed the $63,000 mark for the first time.
    • The rally has come in anticipation of cryptocurrency exchange Coinbase’s hotly tipped US stock market listing.
    • Earlier on Wednesday, the price of Dogecoin, recorded a new milestone as it went up by 54%, establishing a new all-time high of $0.1161.
    • Meanwhile, Coinbase, a Cryptocurrency exchange, finally made its highly anticipated debut on Nasdaq on Wednesday, April 14, 2021, becoming the first company devoted entirely to cryptocurrency to enter the US stock exchange with a $100 billion valuation.

    READ: Naira remains flat as external reserve fall to just 6 months of imports

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    Oil price gain

    Brent crude oil price jumped on Wednesday to close at $66.63 per barrel, indicating a 3.98% increase compared to $64.08 recorded at the close of trade on Tuesday as the Energy Information Administration (EIA) reports crude draw.

    • The EIA in its report said that crude oil inventories had shed 5.9 million barrels in the week to April 9, compared with an inventory draw of 3.5 million barrels reported for the previous week.
    • The EIA’s inventory estimate comes a day after the American Petroleum Institute reported a 3.6-million-barrel inventory draw in crude oil for the same period but a 5.565-million-barrel build in gasoline stocks, which prevented oil prices from swinging significantly up or down.
    • The oil rally can also be attributable to the picking up of US oil demand as economic expansion quickens. The West Texas Intermediate (WTI) crude futures surged more than 5% on Wednesday and broke out the narrow trading range they had been stuck in since mid-March.
    • Morgan Stanley, meanwhile, said in a new note that it expected prices to remain range-bound through the end of the summer, at between $65 and $70 per barrel for Brent.
    • Brent Crude closed at $66.63 (+4.65%), WTI Crude closed at $63.18 indicating 4.99% gain, Bonny Light, $62.56 (+0.58%), OPEC Basket (+0.67%) to close at $61.87 while Natural gas declined by 0.08% to close at $2,617

    External reserve

    Nigeria’s external reserve gained about $34 million on Tuesday, 13th April 2021 to close at $35.172 billion, being the highest external reserve position recorded in over a month.

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    • This indicates a 0.1% increase when compared to $35.138 billion recorded on Monday, 12th April 2021.
    • It also represents an increase in the country’s external reserve position for the 16th consecutive day, having endured a significant downturn earlier in the year. Nigeria’s reserve has added a total of about $756 million in 16 days.
    • This recent increase in Nigeria’s external reserve could however be attributed to the increase in crude oil prices recorded earlier in March before the recent bearish trade in the crude market.
    • It could be attributed to the possible increase in diaspora remittance as the CBN offers incentives for every unit of a dollar received in Nigeria from diaspora remittance.
    • The external reserve is likely to get a further boost, as the Federal Government recently announced plans to issue $500 million Eurobonds for 2021.

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