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Naira Hits 278 as Dollar Supply Worsens

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naira

The naira took further beating on Thursday at the parallel market, trading near its 2015 low of 280 against the United States dollar.

The dollar was sold for N278 at the parallel market on Thursday, as against 273 on Wednesday and 267.5 on Tuesday. The naira had on Monday closed at 265 against the dollar, compared to 263 on Sunday.

The Central Bank of Nigeria had on Wednesday sold about $15.5m to 1,650 Bureau De Change operators, but this was not enough to stem further slide of the nation’s currency at the unofficial market. The official rate ranges from 197 to 199.

The naira had on December 17, 2015 crashed to 280 against the greenback at the parallel market.

The Acting President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, in a telephone interview with our correspondent, said he expected the weakness in the naira to continue.

“The naira has been battered seriously. We are talking about 278 now from 273 yesterday (Wednesday). Dollar demand is coming up and the supply is very limited.

“The CBN sold about $15.5m to 1,650 BDCs on Wednesday. Still there is a drastic short supply. Honestly, I am afraid because it is all about demand and supply and the way the thing is going, the demand is twice the supply in the market. To me, I don’t see the naira getting stronger soon.

The nation’s currency had closed at 262 against the greenback before the New Year holiday started last Wednesday. After the Christmas holiday, the local currency rose from 265 to 260.

Forex scarcity, which has caused significant decline in the nation’s external reserves, prompted the CBN to ration dollar supply to banks, importers, BDCs and the general public.

The nation’s external reserves declined by 15.79 per cent year-on-year to about $29.070bn on December 31, 2015, compared to $34.52bn a year ago, according to data from the CBN.

The nation’s foreign reserves fell by $112m to $28.960bn on January 5, latest data obtained from the Central Bank of Nigeria on Wednesday showed.

The CBN recently cut its weekly forex sale to the BDCs from $30,000 to $10,000 each.

Earlier, the central bank had refused to sell forex to over 1,600 BDCs over their failure to provide necessary documents for previous allocations.

At the official interbank market, the currency has been pegged since February and stood at 197 against the dollar on January 6. It traded at 199 to the dollar on the official interbank market on Thursday.

The BDCs account for less than five per cent of the total dollar trade in Nigeria, but provide an indication of where investors see liquidity and are willing to trade it.

Since June 2014, the CBN has limited the availability of hard currency to importers and placed restrictions on interbank dealing as it tried to mitigate an oil price crash that has gutted the government’s revenues.

Analysts predict that the naira will inevitably be revalued this year, causing further pain in a country that is heavily dependent on imports. The CBN has spent billions from the country’s already dwindling dollar reserves to shore up the currency.

“The issue is when, not whether they will [devalue]”, the Chief Macroeconomist at Ecobank Capital, Gaimin Nonyane, was quoted by Forbes as saying.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and Investing.com, with over a decade experience in the global financial markets.

Forex

Again CBN Devalues Naira by N6 Ahead of World Bank’s $1.5bn Loan Request

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Naira Dollar Exchange Rate

The Central Bank of Nigeria (CBN) has once again devalued the Nigerian Naira by N6 to the United States Dollar, making it the third time the apex bank will adjust the Naira exchange rate this year.

The devaluation brings the CBN closer to actualising foreign exchange unification demanded by the International Monetary Fund (IMF) in April before the $3.4 billion loan was approved.

This same condition was enforced by the World Bank as a prerequisite for approval of $1.5 billion loan request submitted by the Federal Government. The loan the Minister of Finance, Budget and National Planning, Mrs Zainab Ahmed, said she was positive it would be approved by the multilateral institution in the next meeting given that the Federal Government has met all the conditions for the said loan.

24 hours later, the apex bank devalued the Naira official rate by N6 from N379/US$ to N385/US$. While the International Money Transfer Service Operators (IMTOs), all authorised dealers, bureau de change operators and service providers were asked to add N6 across all rates.

The rate for IMTOs against the US dollar has now moved from N382 to N388. Meaning banks will now sell dollar to the CBN at N389, up from the previous N383 to us dollar.

Again, the Central Bank sale of dollar to the bureau de change operators was pegged at N390 to dollar, against the old N384 to US dollar.

The apex bank, therefore, directed the BDCs to sell at not more than N392 per dollar to end-users. The old rate was N386 to a US dollar.

The CBN circlar reads in part, “Weekly Exchange Rate For Disbursement of Proceeds of International Money Transfer Service Operators’ pegged IMTOs sale of dollar to banks at N388 to dollar; banks sale of dollar to CBN at N389 to dollar and CBN sale of dollar to BDCs at N390 to dollar. The BDCs are now expected to sale to end-users at not more than N392 to dollar and each BDC is entitled to buy $10,000 weekly”.

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More Problem for CBN as Naira Approaches N500/US$ at the Black Market

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Forex Weekly Outlook March 6 - 10

Naira plunged against the United States Dollar to a record low of N495 at the black market on Thursday despite the Central Bank of Nigeria saying it has enough financial means to meet forex demands.

The Naira declined by N12 from N483 it exchanged on Monday amid persistent scarcity and high demands by importers and businesses looking to offset COVID-19 losses with the usual December high demand sales.

Godwin Emefiele, the Governor of the Central Bank of Nigeria (CBN), on Tuesday blamed the wide foreign exchange rate at the black market on speculators and hoarders looking for personal gain at the expense of the nation.

He went on to caution experts using black market rates to analyse the local currency performance to stop and claimed that section of the forex only accounts for 5 percent of the nation’s total foreign exchange transactions.

While that might be true, it is also true that majority of manufacturers and businesses have turned to the black market for their forex needs in recent months, especially after it became obvious that the apex bank does not have enough liquidity to service the economy.

The nation’s foreign reserves has been battered by the weak oil prices and the continuous production cut by OPEC and allies to artificially support low prices. Nigeria’s foreign reserves is presently hovering between $35 billion and $36 billion after plunging from $45 billion attained in June 2019, according to the latest data from the Central Bank of Nigeria.

Against the British Pound, the Nigerian Naira depreciated by N15 to N635 from N620 it exchanged on Monday. Another indication of chronic forex scarcity as the local currency also plunged to N580 against the European common currency, the Euro.

The wide forex is expected to further weigh on the nation’s inflation rate and consumer spending this December.

On Tuesday, the apex bank left the interest rate unchanged at 11.5 percent and attributed the rising inflation rate to structural policies, the recent #EndSARS protest and a surging fuel price.

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Forex

Naira Gains N1 to N483 Against US Dollar as CBN Warned Speculators of Impending Doom

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Naira Remains under pressure

The Central Bank of Nigeria on Tuesday warned speculators and hoarders of the United States Dollar against creating artificial forex scarcity for personal gain.

Godwin Emefiele, the Governor of the Central Bank of Nigeria, said black market forex rates does not reflect the economic reality of the Nigerian Naira as that section of the forex is tainted with bribes and individuals looking to profit at the expense of the nation.

We do not agree that the determining factor for our currency should be based on a market that is tainted, where people go to offer bribes,” he stated during a virtual monetary policy committee briefing in Abuja.

The Nigerian Naira gained N1 against the United States dollar to trade at N483 at the parallel market also known as the black market, up from N484 it traded on Monday.

Emefiele said “The black market is illegal where people do not provide documentation to support transactions. It is unfortunate and unfair for analysts to say Nigeria’s exchange rate is at 480 per dollar.”

The Association of Bureau De Change Operators of Nigeria (ABCON) agreed with the central bank, saying speculators and currency hoarders are responsible for the wide forex rates. The association warned that speculators are going to lose money given that the apex bank has foreign reserves of $36 billion to support the local currency and meet forex demands.

The apex bank left the interest rate unchanged at 11.5 percent to further stimulate growth in the real sector and speed up the recovery process with cheaper loans. Other ratios were left unchanged as well.

Speaking on the rising inflation rate, Godwin Emefiele attributed the 14.23 percent increase in consumer prices to the rising pump price, the recent #EndSARS protest and structural policies.

Therefore, it looks like the apex bank will damn rising inflation for the first time to focus on economic productivity, new job creation and general growth.

The Naira CBN official rate remains $379 to a United States Dollar while it exchanged at N385 on the Investors and Exporters Forex Window on Tuesday.

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