Naira weakens as forex turnover falls by 88%

Forex turnover fell by 88% on Wednesday at the I&E window weakening the exchange rate to N386.76/$1. The exchange rate at the black market however remained flat at N461/$1 for the third consecutive day this week.  

NAFEX: The naira depreciated against the dollar at the Investors and Exporters (I&E) window on Wednesday, closing at N386.75 to a dollar, compared to the N386.50 that was reported on Tuesday, July 7, representing a 25 kobo drop. This is as traders continue to mull over CBN’s adjustment of the exchange rate at the SMIS window. The opening indicative rate was N387.32 to a dollar on Wednesday. This represents a 14 kobo drop when compared to the N387.18 to a dollar that was recorded on Tuesday.       

Parallel Market: At the black market where forex is traded unofficially, the naira remained stable as it closed at N461 to a dollar on Wednesday which was the same rate that it exchanged on Tuesday.   

Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS and the NAFEX (I&E window). Nairametrics reported last week that the government has set plans in motion to unify the multiple exchange rates in line with requirements from the World Bank. Nigeria is seeking a world bank loan of up to $3 billion.     

Forex Turnover    

Meanwhile, forex turnover at the Investor and Exporters (I&E) window recorded a decline on Wednesday, July 8, 2020, as it dropped by 88.4% day on day, a huge decline from the figure that it achieved on Tuesday at the foreign exchange market. This is according to data from the FMDQOTC, an exchange where forex is traded by foreign investors and exporters.       

According to the data tracked by Nairametrics, forex turnover decreasedfrom $103.37million on Tuesday, July 7, 2020, to $11.96million on Wednesday, July 8, 2020, representing an 88.4% drop on a day-to-day basis. This is a reversal from the decent turnover that was recorded the previous day and is a far cry from the $200 million mark that was achieved in January and last week.  

Rate Adjustment  

Nairametrics reported on Wednesday that the CBN official rate has been adjusted from N360 to a dollar to N381 to a dollar as reflected on the website of the FMDQ.  However, the official rate quoted on the website of the CBN remains at N360/$1.  

According to Reuters, “the naira eased 5.5% on the official market on Tuesday, after the central bank sold dollars to lenders at a lower rate, bowing to pressure from international lenders to unify its multiple exchange rates.” Reuters also reported “the naira eased to 380.50 in off-market trades, from 360.50 close on Monday” quoting sources from traders.  

Nairametrics cannot confirm if the latest adjustment is reflective of the SMIS rates or if the central bank has now taken a bold step towards unification and adjusted its official rate. Reuters claims it’s a move to “unify the exchange rate”.  

What this means: Unifying the Naira around the NAFEX rate is effectively another round of devaluation. If this is carried out and forex liquidity improves, then it could lead to an exchange rate strengthen in the parallel market just like it occurred in 2017.  

The parallel market rate is currently N461/$1 and could converge to the NAFEX rate meaning those who bought above the NAFEX rate could lose money if they sell. 


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