FX Gap Hits N130 as Naira Slumps Across Markets
The gap between the exchange rate between the Investors’ and exporters’ foreign exchange window and the parallel market has widened to about N130 per United States dollar, creating an opportunity for speculative trading activities.
The spread between the two FX spot rates quotes provides opportunities for speculative transactions and opens the door for arbitrage while a potential for round-tripping is also large. The Central Bank of Nigeria (CBN) has started to reverse key policies made under its suspended governor, Godwin Emefiele.
However, the apex bank remained silent on a plan to clear the foreign exchange backlog owed to foreign investors as a result of capital control measures that made it difficult for some multinationals to upstream and repatriate funds abroad.
At the official market for manufacturers who import goods, services and exporters expecting funds inflow, the US dollar was sold for N770.72 on Tuesday from N761.32– marking two days of consecutive local currency depreciation.
Nigeria faces a US dollar and other foreign currencies shortage at the same time when the external reserves buffer continues to nosedive amidst a large question mark. Investment bankers are of the view that the apex bank inflated the foreign reserves under its suspended and detailed chief, Godwin Emefiele.
Last week Friday, the naira appreciated strongly following the central bank intervention, and a decision to bring back Bureau de Change operators and NNPC $3 billion loans.
The monetary authority’s inability to keep the forex supply higher dragged the local currency into the mud against the continuous rising influence and dominance of the US dollar. A large bucket of FX demand remains unfilled by the apex bank amidst rising doubt about
In the parallel market, the local currency increased by 4.65% to N900 while the global oil market spiralled downward as Iranian boosted crude oil exports. Brent crude fell 0.15% to $84.33 per barrel, while WTI crude lost 0.36% to $79.83 per barrel.
Oil futures were lower on Tuesday, as demand concerns lingered despite a People Bank of China (PBOC) lending rate cut failed to stimulate the market. Elsewhere, gold was trading near $1,897 per ounce (+0.18%), driven by dwindling demand for non-yielding bullion as US Treasury yields rebounded.
