Exchange rate falls at the NAFEX window on a depressed forex market

Nigeria’s exchange rate at the NAFEX window depreciated to close at N386 during intraday trading on Wednesday, August 12, 2020. In another development, the exchange rate at the parallel market remained stable for a third consecutive trading day on Wednesday as it closed at N475/$1.

Market Watch

Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable again for the third consecutive day against the dollar to close at N475/$1 on Wednesday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged on Tuesday, August 11.

NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N386/$1.

  • This represents a 50 kobo drop when compared to the N385.50 rate close that was reported on the last trading day, Tuesday, August 11.
  • The opening indicative rate was N386.25 to a dollar on Wednesday. This represents a 5 kobo drop when compared to the N386.20 to a dollar that was recorded on Tuesday.
  • The N387 to a dollar is the highest rate during intraday trading. 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 decline on Wednesday, August 12, 2020, as it dropped by 32.57% a day on day.

  • According to the data tracked by Nairametrics from FMDQ, forex turnover declined from $31.96 million on Tuesday, August 11, 2020, to $21.55 million on Wednesday, August 12, 2020.
  • The forex turnover for this week is still not as impressive as the market is still experiencing low volumes. This just as dollar supply has remained very weak.
  • The average forex sale for last week was about $50.6 million which is an improvement on the $32 million that was recorded the previous week. FX turnover which hit a record low of $3.97 million on Monday recorded an improved figure on Wednesday but 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.

Exchange rate unification remains on the cards and yet to be implemented weeks after the central bank governor confirmed it will be executed.

The foreign exchange market appears to be getting used to the recent adjustment of the official exchange rate by the Central Bank of Nigeria.


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