By Jeph Ajobaju, Chie Copy Editor
Stability has greeted the naira this week riding on the crest of $500 million the Central Bank of Nigeria (CBN) has pumped into Bureau De Change (BDC) operations since September 7.
On Friday November 6, the naira depreciated to N465/$1 at the black market where foreign exchange (forex) is traded by BDC operators. It maintained that rate on Tuesday November 10.
The CBN first injected $51.8 million into the forex market on September 7 through BDCs to prop up the value of the naira and strengthen the economy.
Forex turnover rose 173 per cent as exchange rate at the NAFEX window remained stable against the dollar at N385.67/$1 during intra-day trading on Tuesday, as reported by Nairametrics.
The naira remained stable against the dollar, at N465/$1 at the parallel market as BDC operators got another round of dollar supply from the CBN.
Parallel market
Abokifx, which tracks black market forex trading, said the naira remained stable against the dollar at N465/$1 on Tuesday, the same rate on Monday.
Data aggregated by Nairametrics shows that
· The naira had strengthened by about 7.8 per cent within one week in September at the black market, as the CBN introduced measures targeted at exporters and importers.
· The measures aim to boost dollar supply and reduce high forex demand by traders.
· The CBN has sold over $500 million to BDCs since they resumed forex sales on September 7.
· This was expected to inject more liquidity to the retail end of the forex market and discourage hoarding and speculation.
· Up to last week, exchange rate against the dollar was volatile after initial gains following the CBN’s resumption of dollar sales to BDCs.
· Association of Bureau De Change Operators President, Aminu Gwadebe, said he expects the impact of extra liquidity in the market to be gradual.
· Despite the drop in speculative buying of forex, huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the forex market.
NAFEX
The naira remained stable against the dollar at the Investors and Exporters (I&E) window on Tuesday, closing at N385.67/$1.
· This was the same rate of exchange on Monday.
· The opening indicative rate was N385.83 to a dollar on Tuesday, a 38 kobo gain compared with N386.21 on Monday.
· N393.57$1 was the highest rate during intra-day trading before it closed at N385.67/$. It also sold for as low as N380/$1 during trading.
Forex turnover
Forex turnover at the Investor and Exporters (I&E) window rose 173 per cent on Tuesday.
· Data Nairametrics tracked from FMDQ shows forex turnover rose from $51.62 million on Monday to $140.95 million on Tuesday.
· The CBN is still struggling to clear the backlog of forex demand, especially by foreign investors wishing to repatriate their funds.
· Increase in dollar supply on Tuesday after the previous trading day’s drop reinforces the volatility of the forex market.
· In relative terms, dollar supply has been on a decline for months due to low oil prices and the absence of foreign capital inflow into the country.
· As part of the measures to check forex abuse and illegal transactions, the CBN last month directed the freezing of accounts of about 38 companies.
· Average daily forex sale last week was about $169.93 million, a huge increase from the $34.5 million recorded the previous week.
· Total forex trading at the NAFEX window in September was about $1.98 billion, compared with $843.97 million in August.
· Exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy hit by the coronavirus pandemic.