Forex turnover dropped by 50.5%, as the Naira’s exchange rate at the NAFEX window appreciated against the dollar to close at N392/$1 during intra-day trading on Wednesday, December 23.
Also, the Naira appreciated against the dollar – closing at N475/$1 at the parallel market on Wednesday, December 23, 2020 – as banks struggle to meet forex demand, especially for personal travel allowance (PTA) customers due to scarcity of foreign exchange.
READ: New CBN guidelines ban MMOs, PSPs, Operators from receiving diaspora remittances
According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira appreciated against the Dollar to close at N475/$1 on Wednesday – a N1 gain when compared with the N476/$1 that it exchanged for on Tuesday, December 22.
READ: Naira gains at black market as improved dollar supply continues
- 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 is to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders.
- However, the gains appear to have been completely erased with the recent crash of the exchange rate.
- The CBN has sold over $1 billion to BDCs since they resumed forex sales on Monday, September 7, 2020.
- This was expected to inject more liquidity into 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.
- Despite the CBN’s intervention, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.
READ: Naira appreciates in forex markets as CBN intervenes with record dollar supply
NAFEX
The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N392/$1.
- This represents a N2.67 gain when compared to the N394.67/$1 that it exchanged for on Tuesday, December 22.
- The opening indicative rate was N393.13 to a dollar on Wednesday. This represents a N1.27 drop when compared to the N391.86 that was recorded on Tuesday.
- The N396 to a dollar was the highest rate during intra-day trading before, it still closed at N392 to a dollar. It also sold for as low as N386/$1 during intra-day trading.
- Forex turnover: Forex turnover at the Investor and Exporters (I&E) window declined by 50.5% on Wednesday, December 23, 2020.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $236.91 million on Tuesday, December 22, 2020, to $117.23 million on Wednesday, December 23, 2020.
- The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate their funds.
- The drop in dollar supply after the previous trading day’s sharp 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 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.
- Some members of MPC of the CBN had expressed serious concerns over the increasing demand pressure in the country’s foreign exchange market. This is an obligation of manufacturers to their foreign suppliers that continues to increase in the face of dollar shortages.
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