Naira Plunges Ahead of Banks Transition to BMatch FX Platform
Deposit Money Banks would be moved to conduct FX trading on Bloomberg BMatch system December 2, 2024 after the naira lost 84% in 11 month, from N907.10 in January to N1672.69 at the end of November, 2024.
Last week, the naira plunged by N20 at the Nigerian autonomous foreign exchange market week on week despite the Central Bank of Nigeria (CBN) FX intervention.
Spot data from the FMDQ platform showed that the naira lost N20.07 to close at N1, 672.69 per US dollar in the official market even with $102 million intervention sales to banks.
In the parallel market, exchange rate however gained N22 to close at N1,728.00 as demand pressure eased at the informal sector.
Analysts said foreign currency remittances from abroad has started to have positive impacts on demand and supply at the informal currency market.
Some Nigerians in diaspora has started remitting foreign currency, which has positive effects on US liquidity in the parallel market amidst slowdown in demand.
As a results, the spread or the gap between the two markets narrowed to 3.31% from 5.89% the previous week, TrustBanc Financial Group said in a note,
In November, the Naira appreciated by 0.17% and 0.98%, according analysts notes. The gross balance in the nation’s external reserves reduced first time in the last twelve weeks,
Data from the CBN showed that the gross external reserves reduced by US$34.92 million to US$40.24 billion as inflows slowed down. Nigeria could make Eurobond call in Dec, according to some analysts following $2.2 billion external borrowing approval.
In anticipation of the upcoming Eurobond issuance of USD1.70 billion, analyst at Cordros Capital Limited said they expect stronger FX reserves in the short term, supporting CBN’s ability to keep the naira stable in the short to medium term.
At the bankers meeting, the CBN assured that the Naira’s true value will be restored with the introduction of an electronic FX matching system, which has proven effective in other markets.
The Governor of CBN, Olayemi Cardoso, gave the assurance on Friday night during the 59th annual bankers’ dinner organised by the Chattered Institute of Bankers of Nigeria in Lagos.
Cardoso said that CBN had undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency.
“To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets,” he said.
He said that panic buying was one of the reasons for FX volatility. According to him, it is vital to address the disinformation circulating about a supposed demand-supply gap in the FX market, fueling unnecessary panic.
Cardoso said the current USD exchange rate reflected the price that the most desperate buyers were willing to pay, adding that this does not represent the true market value of the Naira.
“The introduction of the electronic matching system will correct these distortions by enhancing the price discovery process.
“Additionally, it will significantly boost the Central Bank’s oversight and intervention capabilities, ensuring a more stable and transparent foreign exchange market,” he said.
He also explained efforts of the apex bank to boost diaspora remittances to further make the Naira stronger.
“An enabling policy environment has led to a doubling of monthly remittances from an average of 300 million dollars in 2023 to nearly 600 million dollars in August 2024.
“We are committed to further integrating the Nigerian diaspora into our financial system, exemplified by the introduction of the non-resident BVN registration.
“We expect our financial institutions to develop products that not only enable the diaspora to support their families but also provide opportunities for savings and investment in Nigeria,” he said.
Earlier, he explained inherited challenges of FX subsidy regime in 2022 estimated to far exceed that of fuel subsidies, responsible for N4.5 trillion revenue loss.
“In 2022 alone, the potential revenue lost due to a less flexible FX regime was approximately N6.2 trillion, compared to N4.5 trillion from fuel subsidies.
“These funds could have significantly contributed to critical investments in education, healthcare and infrastructure development,” he said.
He further said that some of the various reforms adopted by CBN were already yielding results. #Naira Plunges Ahead of Banks Transition to BMatch FX Platform#
