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Nigeria’s Forex Market Trades $327m as Foreign Investors Jump on Local Bonds

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The nation’s foreign exchange market recorded $327m worth of transactions on Monday, about six times more than its usual volume, the FMDQ OTC Securities Exchange, told Reuters.

This included a single transaction of $270m at N345/dollar by foreign investors buying local currency bonds, the Managing Director, FMDQ OTC Securities Exchange, Mr. Bola Onadele, said in an interview.

Other transactions were carried out from N314.50 to N317.34 per dollar.

Average trading has been around $50m a day on normal days. It might reach $100m on days the Central Bank of Nigeria intervenes in the forex market.

Forex traders said the CBN sold an undisclosed amount of dollars, close to the end of market session, to help prop up the naira.

The naira closed at 305.50 on Monday, up from the 314.95 it closed at on Friday.

Monday’s surge in trading came after the CBN said on Friday that it would offer N212.85bn ($675m) in Treasury bills maturing between 91 days and one year on Wednesday.

The debt will be sold on Wednesday.

The CBN has been selling short-dated open market bills at yields as high as 18 per cent in an effort to attract offshore funds, most of whom fled Nigeria’s bond and equity markets during a financial crisis that began when oil prices plunged.

The crisis ultimately led the CBN to let the naira’s value float in June. From its controlled rate of N197 to the dollar, the local currency plunged to as much as 309 to the dollar on the interbank market and 414 to the dollar on the black market.

The continued ban of eight lenders from the forex market by the CBN has further weakened the naira against the greenback in the past one week.

Nine commercial banks were last Tuesday banned from the forex market for failing to remit the Nigerian National Petroleum Corporation’s $2.334bn into the Treasury Single Account.

The local currency was sold for 414/dollar across some black market segments in Lagos and Abuja on Sunday.

The naira had hit 412 against the greenback at the parallel market on Friday, after closing at 409/dollar on Thursday.

On Wednesday, a day after the CBN banned nine banks from the forex market, the local currency depreciated to 402/dollar, down from the 397 it closed at against the greenback on Tuesday.

At the interbank market, the naira closed at 314.95 on Friday.

Traders said interbank rates would ease this week when part of July’s budget allocation enters the banking system.

The chief executive officers of banks had met with the CBN over the forex ban issue on Thursday. They resolved to work with the CBN to resolve the forex crisis facing the country.

The naira is expected to plunge further against the US dollar this week as the dollar shortage intensifies.

Forex traders said even though the CBN had continued to sell dollars daily on the interbank market, its efforts were considered weak and inadequate, Reuters reported.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Nigeria Hits Historic High as Currency in Circulation Surges to N3.69 Trillion

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Nigeria’s currency in circulation surged to a historic high of N3.69 trillion, according to data released by the Central Bank of Nigeria (CBN).

This figure represents an increase of N43.07 billion or 1.18 percent from the total of N3.65 trillion reported in January 2024 and a 13.64 percent year-on-year rise from N3.25 trillion reported in February 2023.

Currency in circulation encompasses the physical cash, including paper notes and coins, actively used in transactions between consumers and businesses within the country.

The latest statistics indicate a considerable uptick in the availability of cash within the Nigerian economy.

The surge in currency supply comes amidst lingering concerns over a potential cash crunch following the monetary policy adjustments by the CBN, particularly the aggressive tightening stance of the Monetary Policy Committee (MPC).

Analysts attribute this spike to various factors, including the fear factor stemming from the cash crunch experienced in 2023 and lingering uncertainties surrounding the administration of physical currency.

Despite the surge in currency in circulation, Nigeria’s economic growth remains sluggish, with projections indicating growth rates of around 2.9 percent to 3.1 percent for 2024.

Also, inflation remains a significant concern, with the headline inflation rate climbing to 31.70 percent in February 2024 from 29.9 percent reported in January 2024, according to data from the National Bureau of Statistics (NBS).

The CBN’s proactive approach to monetary policy, including a historic increase in the monetary policy rate (MPR) to 24.75 percent, underscores the central bank’s commitment to addressing economic challenges and fostering stability amidst persistent pressures.

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Nigerian Naira Surges to N1,350 per Dollar in Parallel Market

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The Nigerian Naira has appreciated to N1,350 per dollar in the parallel market, a significant gain from its previous rate of N1,430 per dollar just a day earlier.

Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the naira strengthened to N1,382.95 per dollar, indicating an upward trend across key forex segments.

Data from FMDQ revealed that the indicative exchange rate for NAFEM fell to N1,382.95 per dollar from N1,408.04 per dollar on the previous day, representing a gain of N25.09 for the naira.

This surge in the naira’s value has widened the margin between the parallel market rate and NAFEM to N32.95 per dollar from N21.96 per dollar previously.

Analysts attribute this impressive surge to recent foreign exchange reforms implemented by the Central Bank of Nigeria (CBN).

These reforms, including the consolidation of exchange rate windows and liberalization of the FX market, have contributed to bolstering the naira’s strength against the dollar.

The CBN’s proactive measures aim to promote stability, transparency, and liquidity in the foreign exchange market, fostering confidence among investors and strengthening the national currency.

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CBN Governor Reveals $2.4 Billion Forex Forwards Under Investigation

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Naira Exchange Rates - Investors King

Governor Yemi Cardoso of the Central Bank of Nigeria (CBN) disclosed that law enforcement agencies are currently investigating foreign exchange forwards valued at $2.4 billion.

This announcement came in the wake of the Monetary Policy Committee (MPC) meeting held in Abuja on Tuesday, March 26.

Governor Cardoso shed light on the meticulous forensic audit conducted on these transactions, which uncovered numerous discrepancies, rendering them ineligible for payment.

The CBN, while settling certain tranches of FX backlog, encountered transactions riddled with issues concerning their authenticity.

To address these concerns, Deloitte management consultants were enlisted to conduct a comprehensive forensic analysis spanning several months.

The audit revealed a multitude of irregularities, including allocations disbursed without corresponding requests, lack of proper documentation, and instances of outright illegality.

Cardoso emphasized the gravity of the situation, stating, “We refused to validate them because, apart from the fact that documentation was not satisfactory in many cases, they were outright illegal.”

He underscored the commitment of law enforcement agencies to investigate these transactions thoroughly.

Despite concerns about potential backlogs among stakeholders, Cardoso assured that the market remains open and transparent for addressing any outstanding contractual obligations.

The CBN has diligently verified and settled recognized backlogs of forward transactions.

This revelation comes at a critical juncture as Nigeria grapples with economic challenges, including inflationary pressures.

The MPC’s decision to raise the benchmark interest rate to 24.75 percent reflects efforts to stabilize prices and restore the purchasing power of the average Nigerian.

As investigations unfold and regulatory scrutiny intensifies, the CBN’s commitment to transparency and financial integrity will be closely monitored by stakeholders across the nation.

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