EXCHANGE RATE STABILIZES ACROSS FOREX MARKETS AS CBN INTERVENES
At the black market, the Naira remained stable against the dollar to close at N465/$1 on Tuesday.
Central Bank Continues intervention in Forex market to stabilize
Forex turnover rose by 173% as Nigeria’s exchange rate at the NAFEX window remained stable against the dollar to close at N385.67/$1 during intra-day trading on Tuesday, November 10.
Also, the naira remained stable against the dollar, closing at N465/$1 at the parallel market on Tuesday, November 10, 2020, as Bureau De Change operators get another round of dollar supply from the Central Bank of Nigeria.
Parallel market: According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira remained stable against the dollar to close at N465/$1 on Tuesday.
This was exactly the same rate that it exchanged for on Monday, November 9.
The local currency had strengthened by about 7.8% within one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers.
This was so as to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
The CBN has sold over $500 million to BDCs since they resumed forex sales on Monday, September 7, 2020.
This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.
The President of the Association of Bureau De Change Operators, Aminu Gwadebe, said he expects the impact of the extra liquidity in the market to be gradual.
Despite the drop in speculative buying of foreign exchange, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.
This was the same rate that it exchanged for on Monday, November 9.
The opening indicative rate was N385.83 to a dollar on Tuesday. This represents a 38 kobo gain when compared to the N386.21 that was recorded on Monday.
The N393.57 to a dollar was the highest rate during intra-day trading before it closed at N385.67 to a dollar. It also sold for as low as N380/$1 during intraday trading.
Forex turnover: Forex turnover at the Investor and Exporters (I&E) window rose by 173% on Tuesday, November 10, 2020.
According to the data tracked by Nairametrics from FMDQ, forex turnover rose from $51.62 million on Monday, November 9, 2020, to $140.95 million on Tuesday, November 10, 2020.
The CBN is still struggling to clear the backlog of foreign exchange demand, especially by foreign investors wishing to repatriate their funds.
The increase in dollar supply after the previous trading day’s drop reinforces the volatility of the foreign exchange market. 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.
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.
The average daily forex sale for last week was about $169.93 million, which represents a huge increase from the $34.5 million that was recorded the previous week.
Total forex trading at the NAFEX window in the month of September was about $1.98 billion, compared to $843.97 million in August.
The exchange rate is still being affected by low oil prices, dollar scarcity, a backlog of forex demand, and a shaky economy that has been hit by the coronavirus pandemic.
(Nairametrics)
