Naira Weakens At Official Market, Banks Sell $584m

Data posted on Tuesday by the FMDQ Exchange indicates that the value of foreign exchange transactions on the official Nigeria Autonomous Foreign Exchange Market has surged to $584 million.

This represents a significant increase from the $440m daily transaction previously recorded on the platform.

The development came as the national currency weakened against the United States dollar at the official market on Tuesday.

It closed at N1433/dollar, compared to N1419/dollar recorded on Monday.

Meanwhile, according to data from FMDQ Security Exchange, the forex turnover increased to $584.53m on Tuesday from $440.13m recorded on Monday indicating an increase of $144.4m or 32.8 per cent.

The improved liquidity is following moves by the Central Bank of Nigeria to stabilise the foreign exchange rate.

However, aside from commercial banks, the Central Bank of Nigeria, oil firms, and multinationals also sell dollars at the Nigerian Autonomous Foreign Exchange Market.

Last week, the apex bank rolled out new circulars and guidelines to boost liquidity and narrow the gap between the parallel and official rates of the foreign exchange market. In its most significant foreign exchange guideline, last week, the CBN ordered banks to adjust their FX exposures.

In its circular titled, “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks”, the apex bank expressed worry over the growing trend of banks holding large foreign currency positions.

It said, “The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position. This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”

The CBN mandated that banks’ NOP must not exceed 20 per cent short or 0 per cent long of the bank’s shareholders’ funds going forward. It gave a February 1, 2024 deadline to those who had exceeded its limit.

In response, the national currency gained thrice at the official market following the adjustments.

The naira closed at N1,455.59/$ on Wednesday, 1,445/$ on Thursday, and  N1435.53/$ on Friday last week.

After trading on Tuesday, the naira depreciated marginally by 0.85 per cent as the dollar was quoted at N1,433.89, stronger than N1,421.70 quoted on Monday at the NAFEM market.

However, a Bureau De Change Operator, speaking to The PUNCH said the dollar was traded between N1,480 and N1,485 to the dollar at the parallel market.

He stated, “Today’s market was not too good but the dollar was sold between the rate of N1,480 and N1,485 to the dollar.

Abubakar Taura, said, “Dollar increased to N1,460 today and that is the last price.”

However, another BDC, Suraju, complained of the exorbitant price of the dollar, adding he didn’t trade with the greenback.

He said, “I don’t know the price for today because I didn’t sell at the market. The price for the dollar is too much and I can’t afford it.”

However, economic managers have said the naira will firm up in both markets in the coming days.