Naira gains at NAFEX window as CBN block accounts of some firms for forex abuse
Nigeria’s exchange rate at the NAFEX window appreciated to N386.13 during intraday trading on Friday, September 4, 2020, while it remained stable at N440/$1 at the parallel market.
NAFEX: The Naira appreciated marginally against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N386.13/$1.
This represents a 12 kobo gain when compared with the N386.25 to a dollar that it exchanged on Thursday, September 3.
The opening indicative rate was N386.69 to a dollar on Friday. This represents a 21 kobo drop when compared to the N386.48 to a dollar that was recorded on Thursday.
The N395.13 to a dollar is the highest rate during intraday trading before closing at N386.13. It also sold for as low as N380/$1 during intraday trading.
Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window declined marginally by about 3.3% on Friday, September 4, 2020, after the previous trading day huge increase in turnover.
According to the data tracked by fabpulse from FMDQ, forex turnover dropped from $92.18 million on Thursday, September 3, 2020, to $89.15 million on Friday, September 4, 2020.
Although there was a slight drop, the substantial dollar supply might not be unconnected with the reported moves by the Central Bank of Nigeria (CBN) to start the gradual sales of the greenback to clear demand backlog, especially for foreign investors.
Despite the relative substantial forex supply, the volatility of the foreign exchange market still persists. 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 $23.19 million which represents a significant drop from the $71.13 million that was recorded the previous week. The day’s FX turnover is still a far cry from the $200 million mark that was recorded some 2 weeks ago.
Total forex trading at the NAFEX window in the month of August was about $857 million compared to $937 million in July.
The exchange rate disparity between the official NAFEX rate and the black-market rate has continued to reduce significantly these past few days dropping to N53.87.
Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N440/$1 on Friday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged on Thursday, September 3.
The central bank moved towards exchange rate unification last month after it devalued the official rate to N380/$1.
The local currency has been strengthened especially at the black market as the Central Bank of Nigeria introduces 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 resumption of sales of forex to BDCs will inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
However, the BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders as it was inadequate to meet their expenses.
There has been a sharp 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.
fabpulse had reported that the CBN, in a move against forex abuse, directed deposit money banks to block bank accounts of 38 companies for suspicious foreign exchange infractions. The apex bank instructed the banks to Post-No-Debit on the bank accounts of those companies which include several BDC operators, gaming companies, oil and gas firms and several others.
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