Forex turnover improves significantly by 201% as Nigeria’s exchange rate at the NAFEX window appreciated against the dollar to close at N385.83/$1 during intraday trading on Thursday, October 8
Also, the naira appreciated marginally against the dollar, closing at N457/$1 at the parallel market on Thursday, October 8, 2020, as the Bureau De Change Operators await another round of dollar allocation from the Central Bank of Nigeria.
READ: Naira stabilizes across forex markets as BDCs get over $450m allocation from CBN in 1 month
Parallel market: At the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N457/$1 on Thursday, according to information from Abokifx, a prominent FX tracking website. This represents a N1 gain when compared to the N458/$1 that it was exchanged for on Wednesday, October 7.
Current developments
- The local currency has strengthened by about 7.8% within the last one week at the black market, as the CBN introduced some measures targeted at exporters and importers, in order 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 $450 million to BDCs since the 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 failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.
- BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.
- We also noted that forex traders monitored during the previous week, appeared to hoard forex, as they anticipated further depreciation in the market.
- There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure, and creates a volatile situation in the foreign exchange market.
READ: CBN goes hard on BDC operators, issues various fines
NAFEX: The Naira appreciated against the dollar at the Investors and Exporters (I&E) window on Thursday, closing at N385.83/$1.
- This represents a 17k gain when compared to the N386/$1 that it exchanged for on Wednesday, October 7.
- The opening indicative rate was N386.21 to a dollar on Thursday. This represents a 21 kobo drop when compared to the N386 that was recorded on Wednesday.
- The N392.89 to a dollar is the highest rate during intraday trading before it closed at N385.83. It also sold for as low as N380/$1 during intraday trading
READ: Magu probe: New facts suggest case is about re-looting of previously stolen funds
Forex turnover: Forex turnover at the Investor and Exporters (I&E) window, increased significantly by 201% on Thursday, October 8, 2020.
- According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $58.52 million on Wednesday, October 7, 2020, to $176.23 million on Thursday, October 8, 2020.
- The CBN had in the past few weeks moved to clear the huge backlog of foreign exchange demand, especially by foreign investors wishing to repatriate back their funds.
- The drop in forex supply 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 August was about $857 million, compared to $937 million in July.
READ: Nigeria’s foreign reserves hit $36.57 billion; Emefiele keeps his word on defending the naira
The President of Association of Bureau De Change Operators (ABCON), Aminu Gwadebe, said that the BDCs are a major factor in the stability of the exchange rate. He said the BDCs remain the only threat to hoarding and speculation.
