The Naira on Thursday rose to an eight-month high of 1,120 per dollar on the parallel market, popularly called black market, driven by a series of foreign exchange (FX) reforms of the Central Bank of Nigeria (CBN) that has unlocked dollar liquidity.
With the current exchange rate the Naira has gained 62.95
percent (N705) over the dollar compared to the level of N1,825/$1 in February
2024, according to the data compiled from online platforms and street traders.
“The dollar has fallen because there is no demand. The
market is calm due to the holidays and there are enough dollars in the market
now,” one trader told BusinessDay on Thursday.
Nigeria’s currency on Monday before the holidays
strengthened to 1,230.61 per dollar on the official FX market, despite the
declining external reserves.
After trading on Monday, the Naira gained 1.66 percent as
the dollar was quoted at N1230.61, stronger than N1,251.05 quoted on Friday at
the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data
released by the FMDQ Securities Exchange.
The intraday high closed at N1,261 per dollar on Monday,
stronger than N1,281 closed on Friday. The intraday low appreciated to N1,200
from N1,220 on Friday.
Dollar supply by willing buyers and willing sellers dropped
by 49.43 percent to $125.55 million on Monday from $248.27 million recorded on
Friday.
The external reserves, which gives the Central Bank of
Nigeria (CBN) the firepower to defend the Naira have been declining, following
the apex bank’s interventions to stabilise the currency.
Data from the CBN showed that Nigeria’s foreign currency
reserves declined by 2.95 percent in the last 10 days to $33.434 billion as of
April 4, 2024 compared to $34.449 billion in March 18, 2024.
The apex bank last month said it has successfully resolved
all valid foreign exchange backlogs, as pledged by Governor Olayemi Cardoso,
addressing inherited claims amounting to US$7 billion.
Total inflows into the NAFEM increased by 41.7 percent to
$3.75 billion as against $2.64 billion in February – the highest level since
March 2019 ($6.07 billion), data from the FMDQ indicated.
Nigeria’s Central Bank on Monday reviewed the exchange rate
for the Bureau De Charge (BDC) Operators to N1,101 per dollar from N1,251/$1 as
it plans to sell $15.88 million to 1,588 eligible BDCs.
As part of measures to control inflation and stabilise the
Naira, the CBN last month raised its benchmark interest rate, known as the
Monetary Policy Rate (MPR) by 200 basis points to 24.75 percent from 22.75
percent in February 2024.
On June 14, 2023, the CBN enacted several significant
reforms, including the abolishment of market segmentation, consolidation of all
segments into the Investors & Exporters window (now called the Nigerian
Autonomous Foreign Exchange), and the reintroduction of the Willing Buyer,
Willing Seller framework.
In August 2023, the CBN resumed Forex sales to BDCs but
implemented a restriction on the buying and selling spread by BDCs to +/-2.5
percent of the weighted average of transactions executed the previous day on
the I&E window.
In January 2024, the apex bank imposed a limit on the Net
Open Position (NOP) of banks in Nigeria, setting it at a maximum of 20 percent
short or zero percent long holding of foreign currency assets and liabilities.
Additionally, the CBN directed International Money Transfer Operators (IMTOs)
to quote an exchange rate for Naira payout to beneficiaries based on the
prevailing market price.
In February 2024, the CBN removed caps on the spread on
interbank Forex transactions and lifted restrictions on the sales of interbank
proceeds. Furthermore, the CBN restricted the payout of Personal Travel
Allowance (PTA) and Business Travel Allowance (BTA) to electronic channels
only.
According to FSDH Research, the implementation of these
measures has contributed to the reduction of volatility in the Naira in the FX
markets.
By March 2024, the volatility of the Naira had further
decreased following additional reforms by the CBN aimed at enhancing
transparency and inflows into the FX market. On March 28, the NAFEM closing
rate stood at N1309.4, reflecting a significant appreciation from its peak of
N1,650 on February 26, 2024, a report by FSDH stated.
Analysts at FSDH expressed optimism, stating, “We believe
that the recent FX reforms, coupled with high interest rates and improved oil
production, will bring stability to the FX market.”
0 comments:
Post a Comment