Forex

Stakeholders Urge CBN to Liberalise Forex Market

Published

7 years ago

November 23, 2016

Stakeholders Urge CBN to Liberalise Forex Market

Stakeholders in the financial services industry have urged the Central Bank of Nigeria (CBN) to liberalise the foreign exchange (forex) market and allow the naira to float freely.

This is coming amid concerns that CBN’s decision to stop banks from selling dollars to bureaux de change (BDCs) and the clampdown on BDCs for selling dollar above N400 may worsen the exchange rate at the parallel market.

Though the naira has weakened by 36 per cent since June to around N310 per dollar in the official market, investors believe the exchange rate is still being controlled by CBN.

This has led the FMDQ Over-the-Counter (OTC) exchange to announce the suspension of the FMDQ interbank spot rate, replacing it with the CBN spot rate until the general market structure becomes more credible and transparent.

The naira has fallen to N460 from N335 on the black market in that period as businesses struggle to access foreign exchange from their banks. The depreciation occurred despite continuous intervention by the CBN almost on weekly basis, in the market.

FMDQ Over-the-Counter Securities Exchange Chief Executive Officer, Bola Onadele, accused the CBN of using “strong moral suasion” to prevent the naira from depreciating to a market-related level, and called on the regulator to let the currency float freely.

“The average daily turnover in the spot market used to be $1 billion and now it’s less than $100 million. I don’t believe the parallel market is illegal any more. We have inadvertently legitimised it through some of our actions. It may no longer be as small a market as we used to think. If you have $1,000 to convert to naira, will you sell it at 315? No rational person will do that. You’ll sell to a bureau de change and get N460,” Onadele, a former chief dealer at Citigroup Inc’s Nigerian unit, told Bloomberg.

“No one believes the N305 price of the naira on their screens,” Onadele said, “That devaluation risk is still there. It would only melt away when the market establishes a credible price formation on the back of transparent trading operations by the banks. We need to have proper price discovery.”

Afrinvest West Africa Managing Director, Ike Chioke, said his expectations of further fragmentation of the forex market and a liquidity constraint at the parallel market materialised last week as black market operators refused to sell dollars at the regulatory mandated rate of N400/$1 but willing to buy at N395/$1.00, most likely to hoard.

However, he said the naira/dollar rate at the underground parallel market for operators willing to defy regulatory directives on rate traded between N455/$1 and N465/$1 without liquidity constraints.

Chioke said dollar scarcity at the official market was reaffirmed by drop in daily forex turnover to about $1 billion, while approximately $100 million was recorded as unmet demands.

“Accordingly, investor sentiment remained depressed by currency risk as liquidity crunch lingers. Performance at the parallel market however improved as the naira firmed against the dollar on all trading days of the week amidst reports of dollar sales to Bureau De Change operators by Travelex. Parallel market rates closed at N460 to dollar,” he said.

Meanwhile, security agents have continued to raid the offices of black market currency dealers, detaining some dealers and ordering others to sell dollars at a lower rate in a bid to break the fall of the currency, dealers said.

“The police and state security service officials are raiding black marketers in Lagos and Abuja to compel an appreciation of the naira,” Mallam Adamu, a bureau de change operator, said.

Another trader said security agents visiting BDCs told dealers not to sell dollars for more than N395 but that only created more anxiety in the market, with fears that the practice may worsen exchange rate worries.

“We’ve stopped buying dollars from just anybody that walks into our shop due to the harassment from security agents and a directive from our association,” said a dealer, who asked not to be named.

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Samed Olukoya

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

Naira’s Upsurge Strains Nigeria’s Foreign-Exchange Reserves

Published

12 hours ago

April 17, 2024

Samed Olukoya

As the Nigerian Naira continued to rebound from its record low against its global counterparts, the nation’s foreign exchange reserves has been on the decline, according to the data published by the Central Bank of Nigeria (CBN) on its website.

CBN data showed liquid reserves have plummeted by 5.6% since March 18 to $31.7 billion as of April 12, the largest decline recorded over a similar period since April 2020.

The recent surge in the Naira follows a series of measures implemented by the Central Bank to liberalize the currency market and allow for a more flexible exchange rate system.

These measures included devaluing the Naira by 43% in January and implementing strategies to attract capital inflows while clearing the backlog of pent-up dollar demand.

Charles Robertson, the head of macro strategy at FIM Partners, acknowledged the Central Bank’s efforts to restore the Naira to a realistic exchange rate, suggesting that it aims to stimulate investment in the local currency and enhance liquidity in the foreign exchange market.

Despite the rapid depletion of foreign-exchange reserves, Nigeria still maintains a significant cushion, bolstered by a rally in oil prices and inflows from multilateral loans.

Gross reserves of approximately $32.6 billion provide coverage for about six months’ worth of imports, according to the International Monetary Fund.

The Central Bank’s disclosure last month that it had cleared a backlog of overdue dollar purchase agreements, estimated at $7 billion since the beginning of the year, indicates progress in addressing longstanding currency challenges.

However, uncertainties remain regarding the extent of dollar debt retained by the Central Bank as revealed by its financial statements late last year.

Furthermore, the decline in foreign-exchange reserves persists despite a surge in inflows into Nigeria’s capital markets, driven by interest rate hikes and increased attractiveness of local debt.

Foreign portfolio inflows exceeded $1 billion in February alone, contributing to a total of at least $2.3 billion received so far this year, according to central bank data.

Analysts remain cautiously optimistic about the trajectory of Nigeria’s foreign-exchange reserves, anticipating stabilization or potential growth fueled by anticipated inflows from Afreximbank, the World Bank, and potential eurobond issuance.

Also, the resurgence of oil prices and the expected return of remittances through official channels offer prospects for replenishing reserves in the near future.

Naira

Dollar to Naira Black Market Today, April 17th, 2024

As of April 17th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,50 NGN in the black market, also referred to as the parallel market or Aboki fx.

Published

13 hours ago

April 17, 2024

Samed Olukoya

As of April 17th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,50 NGN in the black market, also referred to as the parallel market or Aboki fx.

For those engaging in currency transactions in the Lagos Parallel Market (Black Market), buyers purchase a dollar for N1,70 and sell it at N1,060 on Tuesday, April 16th, 2024 based on information from Bureau De Change (BDC).

Meaning, the Naira exchange rate improved when compared to today’s rate below.

This black market rate signifies the value at which individuals can trade their dollars for Naira outside the official or regulated exchange channels.

Investors and participants closely monitor these parallel market rates for a more immediate reflection of currency dynamics.

How Much is Dollar to Naira Today in the Black Market?

Kindly be aware that the Central Bank of Nigeria (CBN) does not acknowledge the existence of the parallel market, commonly referred to as the black market.

The CBN has advised individuals seeking to participate in Forex transactions to utilize official banking channels.

Black Market Dollar to Naira Exchange Rate

Buying Rate: N1,050
Selling Rate: N1,040

Naira

Naira Appreciates to N1,136/$ Officially, N1,050/$ Parallel Market

Published

1 day ago

April 16, 2024

Samed Olukoya

The Nigerian Naira appreciated to N1,136 against the United States Dollar at the official market and rose to N1,050 at the parallel market.

At the official foreign exchange market, data from the FMDQ Exchange revealed that the Naira strengthened by 6.1 percent or N69 from its previous rate of N1,205/$ recorded on Friday to N1,136/$ on Monday.

This surge underscores the effectiveness of recent foreign exchange directives implemented by the Central Bank of Nigeria (CBN), aimed at stabilizing the Naira and bolstering liquidity in the market.

At the parallel market, the Naira appreciated to N1,050 against the Dollar, reflecting an improvement in the currency’s value in informal trading circles.

This resurgence has brought renewed hope to traders and businesses operating in the informal sector, as they anticipate further strengthening of the Naira in the coming days.

The improved exchange rate follows a series of strategic interventions by the CBN to address foreign exchange challenges and stabilize the Naira.

The positive momentum in the forex market has been further reinforced by a surge in total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM), which increased by 41.7 percent to $3.75 billion in March, compared to $2.64 billion in February.

Commenting on the recent developments, analysts at Afrinvest expressed optimism about the continued strengthening of the Naira, attributing it to the CBN’s intensified efforts to bolster liquidity in the market.

They anticipate further improvements in the exchange rate as the apex bank maintains its proactive stance on forex management.