Naira Trades Sideways as Market Digests CBN FX Manual
The naira traded sideways against the US dollar in the official window on Monday, reflecting low payment pressure following the Apex Bank’s FX manual notice.
In its daily FX update, the Central Bank of Nigeria (CBN) indicated that the spot rate closed at N1362.8397 per dollar, up from N1362.2123 the previous day.
The official rate hovered between N1361 and N1365.5000 for transactions consummated at the official window during the day, amid a surge in interbank FX liquidity.
The CBN reported that interbank FX turnover increased to $92.248 million across 90 deals, from $73.565 million last week Friday at the Nigeria Foreign Exchange Market (NFEM).
The Naira strengthened modestly at the NFEM window last week, appreciating by 0.80% w/w to close at N1,362.21/US$1, compared to N1,373.25/US$1 in the previous week.
The local currency recorded stronger gains midweek, trading around N1,357.26/US$1, before giving up part of those gains toward the end of the week.
In contrast, the parallel market weakened slightly, with the Naira depreciating by 0.72% w/w to N1,400.00/US$1 from N1,390.00/US$1 in the preceding week.
Consequently, the parallel market premium widened marginally to 2.77% relative to the official NFEM rate. On the external front, Nigeria’s gross foreign exchange reserves increased by US$456.77 million to US$50.04 billion, reflecting continued improvements in the country’s external position.
The market anticipates that the Naira will trade within a relatively stable range, supported by sustained foreign currency inflows, improving market liquidity, and broader participation following the recent revision of the FX manual.
The updated framework is expected to enhance market flexibility, ease previous restrictions, and further strengthen confidence in the foreign exchange market.
The CBN released the fourth edition of its Foreign Exchange Manual, introducing updated guidelines for foreign exchange transactions and tightening compliance requirements for authorised dealers and market participants.
A major provision of the revised manual is the retention of a Personal Travel Allowance (PTA) of up to $4,000 per quarter for eligible travellers, including pilgrims, medical travellers and Nigerians embarking on international air travel.
Under the new framework, at least 75 per cent of the allowance must be disbursed via payment cards and other approved digital channels, with the remaining 25 per cent paid in cash.
The CBN stated that only Nigerian citizens aged 18 years and above are eligible for PTA, with the allowance accessible once every quarter, defined as January to March, April to June, July to September, and October to December.
The apex bank stressed that beneficiaries must obtain foreign exchange through authorised channels and not from the parallel market. It also outlined additional documentation requirements for foreign medical treatment applications beyond the standard PTA conditions.
The manual further provides operational guidelines for licensed hotels designated as Authorised Buyers of foreign currency from guests.
Such establishments are required to obtain an Authorised Buyer Licence and certification from the Nigerian Tourism Development Authority before opening domiciliary accounts for foreign exchange transactions.
In a move aimed at strengthening market discipline, the CBN introduced stiffer penalties for banks and other authorised dealers that process foreign exchange transactions without adequate documentation.
Financial institutions found culpable will face a penalty of N100 million, plus N10 million for each affected transaction.
The sanctions escalate for repeat violations. First-time offenders risk a 90-day restriction from participating in foreign exchange transactions, while subsequent breaches could attract suspensions of up to 360 days. A fourth infraction may result in a complete ban from foreign exchange dealings.
The revised manual also maintains and clarifies procedures governing imports into the country. Importers are required to process Form ‘M’ through authorised dealers for all physical goods entering Nigeria.
Supporting documents, including certificates of origin, commercial invoices, packing lists and transport documents, remain mandatory.
Other provisions include adherence to Cost and Freight (CFR) terms for most imports, an allowable value variance of plus or minus 10 per cent on Form ‘M’, and registration requirements with the Nigeria Customs Service before transaction validity.
According to the CBN, the manual was issued pursuant to the Foreign Exchange (Monitoring and Miscellaneous Provisions) Act of 1995, the CBN Act of 2007 and the Banks and Other Financial Institutions Act of 2020.
The bank said the updated guidelines are designed to promote transparency, curb market abuses, safeguard external reserves and ensure that foreign exchange is channelled towards productive sectors of the economy. CBN Raised N4.5trn from OMO, Treasury Bills Auctions
