Nigeria’s currency on Wednesday remained unchanged on the black market as it traded at an average rate of N459/$. The naira stability follows increased liquidity and low demand for dollars by the end-users. While the dollar was trading at N458 at Festac, it was trading at N460 in Apapa areas of Lagos.
The Central Bank of Nigeria (CBN) on Tuesday adjusted the exchange rate at the official window by 5.54 percent to N381 per dollar from N361/$, a move seen as helping to curb roundtripping.
The foreign exchange daily turnover rose significantly by 918.42 percent to $103.37 million on Tuesday from $10.15 million recorded on Monday at the I&E window.
At the Investors and Exporters (I&E) forex window, the market opened with an indicative rate of N387.32k on Wednesday. This represents marginal depreciation of N0.14k when compared with N387.18k opened with on Tuesday, data from FMDQ revealed.
Naira was also stable at the retail bureau segment as the dollar was trading at N460. The Apex bank on March 26, suspended foreign exchange sales to the Bureau De Change (BDC) operators until further notice due to the Covid-19 lockdown as requested by the operators. The suspension notwithstanding, some BDCs are still active in the market.
The CBN said on April 29, 2020, that it has made complete arrangements to resume foreign exchange sales to the BDC segment of the market for business travels, personal travels, and other designated retail uses, as soon as international flights resume.
With the official rate at N381, the CBN has unified the exchange rate as the foreign exchange spot and forward shows that dollar was quoted at N380.69k on Tuesday at the Secondary Market Intervention Sales (SMIS) – a window where importers access foreign currencies.
At the Investors and Exporters (I&E) forex window, Naira was stable as the dollar was quoted at N386. 50k on Tuesday, data from FMDQ indicated.
Reacting to the Naira devaluation, Ayodeji Ebo, managing director, Afrinvest Securities Limited said this is a positive move by the CBN. The convergence of the rates across the various FX segments will curb round-tripping and improve investor confidence.
The final lap he said was the improvement in liquidity at the I&E window to complement the CBN’s efforts towards a stable naira.
“We need the CBN to also intervene in the I&E window and reduce the backlogs. We expect the black market to appreciate in the near term converging towards the N400/$1 psychological level as CBN improves on the supply of the greenback,” Ebo said.
Godwin Emefiele, the CBN governor had told some foreign investors that the desire of the central bank was to achieve exchange rate unification around the Nigerian Autonomous Foreign Exchange Market (NAFEX)/ I&E rate.
The I&E forex market is Nigeria’s dominant market for the purchase and sale of forex and it is a free market where everybody is free to sell their dollars and those who want to buy are free to buy dollars.
Uche Uwaleke, Professor of finance and capital markets, Nasarawa State University Keffi, said any further adjusting of the official Exchange rate by the CBN to align with the rate in the Autonomous Foreign Exchange Market has both merits and demerits. On the upside, it translates to increased naira inflows into the Federation account implying that the three tiers of government will have more money to distribute. Also, It eliminates opportunities for currency round-tripping and sharp practices associated with having multiple Exchange rates thereby promotes transparency in the country’s forex market. By the same token, it will enable price discovery as the real value of the naira becomes established through demand and supply forces as not a few think that the naira is overvalued.