The intra-day high between the naira and dollar sold for N1,519/$1 on Tuesday as forex turnover dropped by 20.26% to $465.29 as the Nigerian naira dropped against the dollar marginally on Tuesday, February 6th, 2024, in the official market.
Despite the drop at the close of trading today, the forex turnover has been on the rise in recent times following the Central Bank of Nigeria’s (CBN) recent release of a new circular to address suspected cases of excessive foreign currency speculation and hoarding from Nigerian banks.
The new circular introduces a set of guidelines aimed at reducing the risks associated with these practices.
The circular, titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” highlights the CBN’s concerns over the growing trend of banks holding large foreign currency positions.
Meanwhile, the domestic currency depreciated 0.98% to close at N1433.89 to a dollar at the close of business, based on data from NAFEM where forex is officially traded.
This represents an N14.03 loss or a 0.98% decrease in the local currency compared to the N1419.86 it closed at on the previous day.
The intraday high recorded was N1,519.78/$1, while the intraday low was N894.99/$1, representing a wide spread of N624.79/$1.
This is the 6th straight day that the exchange rate intra-day high has remained at above N1,500/$1.
According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $465.29 million, representing a 20.26% decrease compared to the previous day.
However, the naira appreciated marginally at the parallel forex market where forex is sold unofficially, the exchange rate quoted at N1450/$1, representing a 0.34% increase over what it closed the previous day, while peer-to-peer traders quoted around N1487.50/$1.
The Governor of the Central Bank of Nigeria (CBN) has stated that recent reforms of the apex bank are beginning to yield positive results concerning liquidity in the foreign exchange market.
Mr. Cardoso stated this during an appearance before the House of Representatives today saying that there has been an increase in dollar liquidity within the country’s currency market.
He stated, “As of yesterday, the volume of transactions in our market was over $800 million. This is the first time in many years it has achieved this level.
“I want to emphasize that we are now at a turning point and bold reforms are underway across different segments of the economy. I’m confident that positive outcomes are already emerging and will become more apparent shortly.”
Over the past weeks, the naira has depreciated significantly against the dollar since January 26th.
This decline follows measures taken by the central bank to align the official market value closer to the parallel market, as part of an ongoing effort to bridge the chasm between the rate at the NAFEM window and that of the parallel market.
Yesterday, the naira reached an intra-day high of N1,526/$1 but closed at N1,419.86/$ on the NAFEM window.
The scarcity of dollars in the domestic market has significantly contributed to the currency’s weakness. The central bank has been actively addressing this issue by urging Nigerians residing abroad to repatriate their funds through official channels, aiming to stabilize the currency.
Part of the reforms the CBN has introduced includes clearing the backlog of forex obligations which Mr. Cardoso claims to have settled $2.3 billion remaining just $2.2 billion.
Also, the apex bank has mooted plans to establish a singular foreign currency (FCY) gateway bank that will centralize all correspondent banking activities and provide incentives to individuals who hold foreign currencies outside the formal banking system.
