The Nigerian currency on Wednesday remained stable in the black market, as it traded at an average rate of N459 per dollar. The stability follows increased liquidity and low demand for the dollar.
However, the Central Bank of Nigeria had on Tuesday adjusted the exchange rate at the official window by 5.54 per cent from N361 to N381 per dollar, a move seen as helping to curb roundtripping.
The foreign exchange daily turnover rose significantly by 918.42 per cent to $103.37m on Tuesday from $10.15m recorded on Monday at the investors and exporter’s window.
At the I&E forex window, the market opened with an indicative rate of N387.32k on Wednesday. This represents marginal depreciation of N0.14k compared to Tuesday’s N387.18k, data from Financial Market Dealers Quotation revealed.
Notably, the naira was also stable at the retail bureau segment, as the dollar was trading at N460. The apex bank had, on March 26, suspended forex sales to the Bureau De Change 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 had made arrangements to resume forex 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 forex spot and forward shows that dollar was quoted at N380.69k on Tuesday at the Secondary Market Intervention Sales – a window where importers access foreign currencies.
Managing Director, Afrinvest Securities Limited, Ayodeji Ebo, described the naira devaluation as a positive move by the CBN.
According to him, 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 CBN’s efforts towards a stable naira.
“We need the CBN to also intervene in the I&E window and reduce the backlog. 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.
The CBN Governor, Godwin Emefiele, had told some foreign investors that the apex bank’s desire was to achieve exchange rate unification around the Nigerian Autonomous Foreign Exchange Market/ I&E rate.
The I&E forex market is Nigeria’s dominant market for the purchase and sale of forex. It is a market where everybody is free to sell their foreign currencies and those who want to buy are also free.
Professor of Finance and Capital Markets, Nasarawa State University, Keffi, Uche Uwaleke, said any further adjustment of the official exchange rate by the CBN to align with the rate in the Autonomous Foreign Exchange Market had 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, he added.
