The naira fell against the U.S. dollar at both the official and parallel market to sustain losses for the second day after it recorded appreciable gain at the weekend.
The exchange rate between the naira and dollar fell to N850.22/$1 on Tuesday at the official market.
This represents an N54.81 loss or a 6.45% decline in the local currency compared to the N795.41 it opened the week on Monday.
The intraday high recorded was N1099.01/$1, while the intraday low was N701.00/$1, representing a wide spread of N398/$1.
According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $143.55 million, representing a 16.47% increase compared to the previous day.
Similarly, the naira weakened at the parallel forex market where forex is sold unofficially, the exchange rate depreciated by 0.44%, quoted at N1140/$1, while peer-to-peer traders quoted around N1126.55/$1.
Backlog of foreign exchange forward contracts: The Central Bank of Nigeria (CBN) recently said it has begun to clear the backlog of foreign exchange forward contracts — a move that is expected to bring relief to the naira, the business community, and the economy at large.
- The country has faced chronic dollar shortages since foreign investors exited local assets during a period of low oil prices. Since then, investors are yet to return and the central bank has struggled to meet the demand for dollars from foreign investors seeking to repatriate funds or airlines seeking to send money from ticket sales abroad.
- The central bank’s payments follow the October 23 announcement by Wale Edun, the finance minister, that Nigeria was expecting $10 billion of inflows to improve FX market liquidity.
- It will come as a relief to local lenders, who have been struggling to meet demands from customers due to chronic dollar shortages in Africa’s largest economy.
Toye Folosho, a director at the Manufacturers Association of Nigeria, said CBN’s clearing of the backlog is a good one for the manufacturing sector because a lot of manufacturers have not been able to procure their raw materials and machinery.
- “The new move by CBN to clear backlogs with international lenders gives the signal that the apex bank is back in trading and business,” Gabriel Idahosa, deputy president of Lagos Chamber of Commerce and Industry, said.
- “Apart from bringing back letters of credit, it generally brings back confidence in the traditional market. It restores the confidence of portfolio investors and international airlines. It will also bring foreign direct investments,” he added.
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