The naira hit a new low in July, closing at N1,563.80/$1 on Friday, July 12, 2024, as it recovered from the previous day’s slight appreciation.
According to data from the FMDQ, the exchange rate from naira to dollar depreciated by 0.59% from N1,554.65/$1 recorded on the NAFEM window on Thursday.
The depreciation occurs after a two-day sale of a dollar worth $122.67 million to 46 authorized dealers by the Central Bank of Nigeria (CBN).
The local currency traded between a low of N1,496.46/$1 and a high of N1,586/$1 on Friday, inching towards the N1,600 ceiling.
Cash squeeze hits after CBN’s FX sales
Foreign exchange (FX) turnover has crashed for the first time this week, falling significantly by 63.73% on Friday.
At the start of the week, FX turnover rose by 14.19% to hit $133.46 million on Monday.
By Tuesday, there was an increase of 41.01% to $188.19 million. The increase continued on Wednesday by 25.78% to $236.7 million.
With the highest increase rate of 47.37%, FX turnover peaked at $348.82 million on Thursday.
This peak coincided with the sales of dollars by the apex bank on Wednesday and Thursday.
In a statement by Dr Omolara Duke, the Director of Financial Markets at the CBN, it was disclosed that the apex bank sold $67.5 million to 27 authorized dealers while purchasing $2.5 million from one authorized dealer on Wednesday.
The bid range for these transactions was between N1,480/$1 and N1,500/$1. Payments for these transactions are scheduled for July 12, 2024, following a two-day settlement cycle (T+2).
On Thursday, the CBN sold $55.17 million to 19 authorized dealers at a rate of N1,540.0/$1. No foreign exchange was purchased on this date. The payments for these spot sales are due on July 15, 2024.
The CBN further urged all authorized dealers to ensure that foreign exchange purchases from the bank are exclusively used for trade-backed transactions, which must be reported within 72 hours.
However, the official market shakes off the CBN’s boost, as it records its first crash to $126.5 million, hitting the lowest level this week.
What you should know
In May, the naira experienced consecutive double-digit appreciation on the official market, with sources saying that the CBN sold more dollars on the official market in anticipation of a $1.3 billion non-deliverable forward (NDF), which matured on May 29, 2024.
According to sources with knowledge of the matter who spoke with Nairametrics in May, the apex bank reverted to its previous strategy of selling foreign currency below the market rate, hoping to artificially lower the exchange rate.
Following the FX sales by the CBN, they broke a three-day depreciation streak on Thursday to close at N1,554.65/$1.
However, this recovery was not sustained as the local currency hit a new low in July.
Nairametrics earlier projected that currency weakness could be imminent as the summer holidays approach when Nigerians mostly fly out of the country for vacations.
This steady depreciation this week occurred amid the claim by the Governor of the Central Bank, Yemi Cardoso, that the country has already experienced the worst of naira volatility regarding foreign exchange.
