Naira Skids as US Dollar Supply Sinks by 20.3%
Nigerian Naira

The Naira depreciated yet again by 0.99% to close at N1,433.89 per US dollar at the Nigeria autonomous foreign exchange market. The volume of US dollars traded in the official market declined by more than 20%, according to data from the FMDQ platform cited by investment firms.

This is coming despite foreign exchange liquidity boosters moves made by the apex bank to upturn the fortune of the local currency. In the parallel market, the naira also closed weak as FX users exchanged N1,455 per US dollar.  

The financial markets experienced significant activity last week, marked by the publication of several circulars by the Central Bank of Nigeria (CBN) aimed at enhancing FX liquidity.

Following the depreciation of the Naira to as low as N1482.57 after warning from the CBN against the unethical reporting practices of authorized dealers, the currency saw an initial appreciation of N1419.86 on Monday.

Last week, the CBN implemented various policies, including directing banks to maintain a zero net long open dollar position, discontinuing daily CRR debits for banks, and applying the existing CRR ratios of 32.5% for commercial banks and 10% for merchant banks to increase in banks’ weekly average adjusted deposits.

Similarly, the CBN also prohibited banks and fintech operators from conducting international money transfer operator (IMTOs) services, permitting banks to act solely as agents. Furthermore, the central bank ceased IMTOs from engaging in outbound transactions and removed the transaction cap for International Money Transfer Operators. 

According to data from FMDQ, there was a notable surge in market turnover after the announcements. Nonetheless, forex turnover experienced a 20.26% decrease, settling at US$465.29 on Tuesday, 6 February.

Despite the optimism surrounding the new FX rules introduced by the apex bank, aimed at augmenting dollar supply from commercial banks and stabilizing the naira in the short term, volatility persists.

“We however note that it is still early in the implementation of these measures and more time is required to assess the impact”, CSL Stockbrokers said in its Tuesday update. #Naira Skids as US Dollar Supply Sinks by 20.3% Oil Prices Steady as Blinken Visits Middle East