Exchange rate stabilizes across forex markets as CBN moves against abuse by dealers
- 26th August 2020
- Posted by: Hakeem
- Category: Currencies
Nigeria’s exchange rate at the NAFEX window remained stable to close at N385.99 during intraday trading on Tuesday, August 25, 2020. In the same vein, the exchange rate at the parallel market also remained stable on Tuesday as it closed at N477/$1.
Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window increased substantially by 442% on Tuesday, August 25, 2020, after the huge drop that was recorded the previous trading day.
- According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $7.20 million on Monday, August 24, 2020, to $39.03 million on Tuesday, August 25, 2020.
- The increase is coming a day after the huge drop in forex turnover following scarcity of dollars.
- This reinforces the continued volatility of the foreign exchange market and the scarcity of the greenback. 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 $71.13 million which represents a significant increase from the $24 million that was recorded the previous week. The day’s FX turnover is a far cry from the $200 million mark that was recorded sometime last week.
- 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 has remained as wide as N91. 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.
Parallel Market: At the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N477/$1 on Tuesday, according to information from Abokifx, a prominent FX tracking website. This was the same rate that it exchanged on Monday, August 24.
NAFEX: The Naira also remained stable against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N385.99/$1.
- This was about the same rate that it exchanged the previous trading day, Monday, August 24, 2020.
- The opening indicative rate was N385.64 to a dollar on Tuesday. This represents a 74 kobo gain when compared to the N386.38 to a dollar that was recorded on Monday.
- The N386 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.
The central bank moved towards exchange rate unification three weeks ago after it devalued the official rate to N380/$1.
Despite the volatility and scarcity of foreign exchange, the naira appears stable across the forex markets. The dollar shortage has forced banks to reduce drastically the dollar spending limits on their debit cards.