NAIRA WEAKENS AS BANKS’ DOLLAR SALES FALL BY $252M
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At the Nigeria Autonomous Foreign Exchange Market on Friday, dollar sales by Deposit Money Banks and other entities fell by $252 million to $84.1 million.
Compared to the $331.1 million in transactions that were registered at the official Nigeria Autonomous Foreign Exchange Market on Thursday, this signifies a 74% decrease.
In the meantime, the value of the naira dropped from N1,498/$ at the official market’s closing of trading on Thursday to N1,537/$ on Friday.
According to an analysis of data from FMDQ Security Exchange, FX turnover fell from $336.11 million on Thursday to $84.10 million on Friday, a 74% decrease. But in addition to commercial banks, NAFEM also sees the sale of dollars by the Central Bank of Nigeria, oil companies, and global corporations.
At the parallel market, on Friday, the naira also depreciated to N1,670/$ from N1,600/$ recorded on Thursday amid a demand with a steady demand for the greenback.
Further analysis for the week ending showed that the supply started at a low of $116.11m on Monday; it increased by $292.3m to $381.92m on Tuesday but dropped to $117.87m on Wednesday. On Thursday, the supply increased to $336.11m.
Market experts hinted that the naira depreciation followed a strong demand for dollars by speculators as well as individuals travelling for business, tourism, education, and health.
According to currency dealers, the demand for the greenback may not end anytime soon.
The FMDQ report indicated that the banks led others to sell $1.97bn in the first week of the CBN circular which had mandated banks not to exceed a new threshold in their FX prudential guidelines.
In a series of guidelines, the CBN ordered Deposit Money Banks to sell their excess dollar stock. It also warned lenders against hoarding excess foreign currencies for profit.
On Thursday, the apex bank released another set of guidelines that stopped banks from paying Personal Travel Allowance to their customers.
In a second circular signed by its Director, Trade and Exchange Department, Hassan Mahmud, it also asked International Oil Companies not to repatriate all their revenue to their parent companies at once. The apex banks also, in the third circular, reviewed its guidelines to stop under-invoicing of exports and over-invoicing of imports.
However, despite the Central Bank’s efforts to boost forex supply through various policy interventions, challenges persist in the forex market.
The gap between the rates in the official market and the parallel market is once again widening, raising concerns about the potential resurgence of round-tripping activities.
Reacting to the circular, banking institutions and IMTOs have begun the implementation, carrying out operational adjustments to accommodate the revised remittance framework by issuing notices to their customers.
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