Exchange rate falls at the NAFEX window on a depressed forex market
- 17th August 2020
- Posted by: Hakeem
- Category: Currencies
Nigeria’s exchange rate at the NAFEX window depreciated closing at N386 during intraday trading on Friday, August 14, 2020. In another development, the exchange rate at the parallel market continued with its stability for a fifth consecutive trading day on Friday as it closed at N475/$1.
Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable again for the fifth straight day against the dollar to close at N475/$1 on Friday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged on Thursday, August 13.
NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Friday, closing at N386/$1.
- This represents a 17 kobo drop when compared to the N385.83 rate close that was reported on the last trading day, Thursday, August 13.
- The opening indicative rate was N386.33 to a dollar on Friday. This represents a 29 kobo drop when compared to the N386.04 to a dollar that was recorded on Thursday.
- The N390 to a dollar is the highest rate during intraday trading before it later closed at N386/$1. It also sold for as low as N380/$1 during intraday trading.
Forex is sold at several prices and at different times during the day.
Forex Turnover: Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded a significant decline on Friday, August 14, 2020, as it dropped by 48.2% a day on day.
- According to the data tracked by Nairametrics from FMDQ, forex turnover dropped from $41.48 million on Thursday, August 13, 2020, to $21.09 million on Friday, August 14, 2020.
- The drop in forex turnover for the day represents a week of continued depressed dollar liquidity. This is just as dollar supply has continued to remain very weak.
- The average daily forex sale for last week was about $24 million which represents a significant drop from the $50.6 million that was recorded the previous week. FX turnover which hit some record low figures in the week is still a far cry from the over $200 million turnover that was recorded in January.
- Total forex trading at the NAFEX window in the month of July was $937 million compared to $875 million in June.
- The exchange rate disparity between the official NAFEX rate and the black-market rate is still as wide as N89. Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window). The wide disparity between the 2 rates has created huge arbitrage opportunities for some highly connected individuals.
The central bank moved towards exchange rate unification two weeks ago after it devalues the official rate to N380/$1.