Naira Rallies on CBN FX Sales to Banks, Plan to Dedollarise
The naira rallied in the foreign exchange (FX) markets except on the BMatch system amidst a plan to dedollarise the Nigerian economy. Spot FX data from the FMDQ platform revealed that the local currency exchange rate appreciated by 0.33%, closing at N1,538.88 per US dollar in the official market.
The fresh positive movement reflected strong US dollar volume on the supply side. A similar experience was noted in the parallel market where Bureau De Change operators quoted N1600 per US dollar on Wednesday, according to channel check.
Recall that the naira opened at N1550 per US dollar, gained N10 at the Nigerian autonomous foreign exchange market yesterday, supported by FX sales to local banks at the beginning of the week.
MarketForces Africa gathered that the Central Bank of Nigeria (CBN) intervened in the FX market, selling $30.5 million to banks between the rate of N1,520 and N1,547 per US dollar to boost liquidity in the foreign currency market.
At the second FX market intervention this week, the Apex Bank sold additional $66.60 billion to banks between the rates of N1,522 and N1,544
On the other hand, the Nigerian naira plunged at the electronic trading platform due to insufficient US dollar liquidity. The market experienced mild pressures that caused the naira to depreciate by 2 bps to N1,553.47 per US dollar in the Nigerian Foreign Exchange Market (NFEM).
DEDOLLARISATION
The bill seeking to prohibit the use of foreign currency in Nigeria has scaled first reading in the House of Senate. The bill, titled “A Bill for an Act to Alter the Central Bank of Nigeria Act, 2007, No. 7, to prohibit the Use of Foreign Currencies for Remuneration and Other Related Matters,” was sponsored by the Chairman of the Senate Committee on Reparations and Repatriation, Senator Ned Nwoko.
The proposed legislation, aimed at ensuring all payments, including salaries and transactions, are conducted in naira, seeks to eliminate discriminatory practices and strengthen confidence in the local currency.
This includes making it mandatory for exports to be paid for in naira. According to Senator Nwoko, the widespread use of foreign currencies in the country’s financial system undermines the value of the naira, which he said perpetuates economic challenges.
The lawmaker described the use of the dollar, pound sterling, and other foreign currencies for transactions in Nigeria as a colonial relic that continues to hinder Nigeria’s economic independence.
REACTIONS
The plan to dedollarize the Nigerian economy has generated mixed reactions from businesses, individuals, and companies. MarketForces Africa gathered that some companies conduct some services in foreign currency as a strategy to match foreign borrowings due to naira fluctuation.
But many Nigerians who spoke with MarketForces Africa see the plan as timely as the US dollar has become the primary means of conducting even basic transactions in the private sector.
“Some expatriates are required to be paid in foreign currency, and some properties are priced in US dollars in major cities. This is not good for the economy as the naira and dollar continue to contest as means of exchange for local transactions,” a senior economist said in a chat with MarketForces Africa.
US dollar may be used for transactions, but it is not a legal tender in Nigeria. Individuals have right to accept or even reject it. But naira instability has forced major private sector players to adopt the greenback as a means of exchange—to retain value.
#Naira Rallies on CBN FX Sales to Banks, Plan to Dedollarise Naira Plummets, CBN Intervenes in FX Market 3 Times
