Nigeria’s exchange rate at the NAFEX window remained stable against the dollar to close at N385.83/$1 during intraday trading on Friday, October 9
Also, the naira remained stable against the dollar, closing at N457/$1 at the parallel market on Friday, October 9, 2020, as the Bureau De Change Operators help to stabilize the forex market with dollar allocation from CBN
READ: Exchange rate stabilizes as CBN investigates over 100 companies for forex abuse
Parallel market: At the black market where forex is traded unofficially, the Naira maintained stability against the dollar to close at N457/$1 on Thursday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged for on Thursday, October 8.
Explore Data on the Nairametrics Research Website
- 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: Nigeria records lowest remittances from abroad since 2008
NAFEX: The Naira remained stable against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N385.83/$1.
- This was exactly the same rate that it exchanged for on Thursday, October 8.
- The opening indicative rate was N385.71 to a dollar on Friday. This represents a 50 kobo gain when compared to the N386.21 that was recorded on Thursday.
- The N393 to a dollar is the highest rate during intraday trading before it closed at N385.83. It also sold for as low as N359.50/$1 during intraday trading
READ: CBN injects fresh $51.8m into FX Markets
Forex turnover: Forex turnover at the Investor and Exporters (I&E) window, declined by 23.5% on Friday, October 9, 2020.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $176.23 million on Thursday, October 8, 2020, to $134.83 million on Friday, October 9, 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: PZ incurs N1 billion in exchange rate loss
The major cause of the stability of the naira and a decline in the volatility of the foreign exchange market is the allocation of over $450 million to the BDC window.
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