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Stakeholders Urge CBN to Liberalise Forex Market

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Forex Weekly Outlook November 7-11
  • 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.

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.

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Naira

Exchange Rate: Dollar to Naira Today, Friday 3 December 2021

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nigerian currency - Investors King

The Nigerian Naira remained under pressure across the board despite efforts by the Central Bank of Nigeria (CBN) to prop up the value of the local currency against its global counterparts.

Backed by Nigeria’s foreign reserves, Naira plunged from N306 against the United States Dollar to N414 at the official forex window during the peak of COVID-19 when crude oil dropped to $15 a barrel and eroded Nigeria’s foreign exchange earnings.

Since then, Africa’s largest economy has instituted various forex policies to support the Naira, deepen economic productivity and generally grow activity across key sectors. However, the lack of a stable foreign exchange market has impeded capital importation needed to prop up Naira value as foreign investors continue to stay off the Nigerian market according to the World Bank.

Naira to Dollar Exchange Rate Official Fx Window (FMDQ)

On Thursday, December 2, 2021, the Nigerian Naira opened at N413.94 against the United States Dollar at the Official Forex Window managed by the FMDQ Group.

The local currency sheds 0.06 percent to a greenback by the close of business on Thursday, closing at N414.80 to a United States Dollar.

Analysing the forex spot market, Naira rose to as high as N404 against the American Dollar during the trading house of Thursday before plunging to N444. Trading activity dropped on Thursday as investors traded $139.69 million US dollars, in contrast to $223.8 million transacted on Wednesday.

Naira Black Market Exchange Rates

At the unregulated forex market, the Naira exchanged hoarders and speculators are exchanging the Naira at N558 to United States Dollar.

This was in spite of the CBN efforts at shutting down activity at that section of the forex market given its damages to the nation’s forex market and the fact that Nigerians were almost adopting the black market rate as the official rate.

Experts, including the Vice President, Yemi Osinbajo have blamed the Central Bank of Nigeria for existing of the black market. According to the Vice President, as long as the forex arbitrage exists due to the numerous forex rates, speculators, hoarders and other forex traders will continue to sustain the unregulated black market.

Central Bank of Nigeria’s Official Naira Rates

The CBN quoted rates are the rates the apex bank sells various currencies to Deposit Money Banks (DMBs) in Nigeria. The DMBs are however expected to add between N1 to N2 on each rate to cover costs when selling to customers.

Nigerian Naira (NGX) to Bitcoin (BTC)

Bitcoin, the world’s most dominant cryptocurrency, lost 0.13 percent against the Naira to N23.299 million or $56,833 in the last 24 hours.

Against Ethereum (ether), the second most capitalised cryptocurrency, the Naira gained 0.15 percent to N1.874 million.

GTBank Naira Exchange Rates

As of December 2, 2021, GTBank exchanged the Naira to the US Dollar at N480. While the Euro, the Canadian Dollar and the Great Britain Pound were traded at N549, N366 and N649, respectively since August 20, 2021. See other Naira exchange rates below.

Currency Rate Date
USD ₦ 480 02/12/2021
EUR ₦ 549 20/08/2021
CAD ₦ 366 20/08/2021
GBP ₦ 649 16/08/2021

Access Bank Naira Exchange Rates

Currency Rate Date
USD ₦ 450 17/11/2021
EUR ₦ 531 31/08/2021
GBP ₦ 621 27/08/2021
CAD ₦ 357 18/08/2021
ZAR ₦ 31 18/08/2021
INR ₦ 6 18/08/2021
TRY ₦ 52 18/08/2021
AUD ₦ 299 01/05/2021
RUB ₦ 7.10 01/05/2021
SGD ₦ 268 01/05/2021
AED ₦ 109 26/11/2020
XOF ₦ 800 15/08/2020

Sterling Bank Naira Exchange Rates

Currency Rate Date
USD ₦ 480 18/11/2021
GBP ₦ 619 18/11/2021
EUR ₦ 534 13/09/2021
CAD ₦ 344 20/08/2021

Union Bank Naira Exchange Rates

Currency Rate Date
USD ₦ 414 18/11/2021
EUR ₦ 484 13/10/2021
GBP ₦ 569.3 13/10/2021
CAD ₦ 316 01/05/2021

UBA Naira Exchange Rates

Currency Rate Date
USD ₦ 465 18/11/2021
EUR ₦ 566 31/08/2021
GBP ₦ 622 23/07/2021
CAD ₦ 316 01/05/2021
AED ₦ 119 08/08/2020
INR ₦ 6.06 03/08/2020

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Naira

Naira Sees Stability at Official Window

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Naira - Investors King

The Naira has this week witnessed a steady, unchanged value against the naira as it closed at N415.07 against the dollar on Wednesday (for the fourth straight day), according to the Investors and Exporters window where the Nigerian currency is traded officially.

As mentioned in a previous article, the Naira appears to have found a resting place for its value heading into the festive period. Even though the Naira is now stable, the value may still be too negative for the Nigerian economy, as food prices and prices for other goods keep going on the rise.

The FMDQ group through its website gives updates concerning the currency’s daily trading (opening and closing prices). It also gives updates on the Spot rate and Forward rate; the prices at which the currency trades for transactions throughout that day as well as future transactions which were agreed on that day.

The Spot rate maintained its usual highest value of N404 per dollar, but its lowest value fell as far as N457.02 per dollar. This is considerably lower than the N444 per dollar which it usually attains.

The Forward rate has however seen changes in value, dropping to a high of only N445.97 per dollar, maintaining its lowest price of N457 per dollar.

The FMDQ group also reports the total turnover of the currency in a day, i.e. the total amount of the currency that was traded throughout that day. On Wednesday, it was revealed that the total amount of the dollar that was traded sat at $223.8 million at the close of the day. This is higher than the $152 million which was recorded the previous day.

At the parallel market (which is not recognized by the Central Bank of Nigeria), the Naira was sold at a price of N558 per dollar as it looks to maintain the recovery which it made after hitting an all time low of N575 per dollar in September.

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Naira

Naira Stabilizes at N415/$1 at Official Fx Window

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Naira - Investors King

The Nigerian currency has continued its trend of closing at N415 per dollar, after it settled to close at that price (which it has closed at consistently since Friday) on Tuesday. This is according to data gathered from the Investors and Exporters window where the Naira is traded officially.

It seems to appear that the Naira has found its resting place at this price, considering the number of days at which it has closed at that particular price. It is now left to see how this currency will trade closer to the festive period.

However, this ‘stability’ cannot be held as a permanent thing, because for this price to be the new normal, it may have to be maintained over a longer period of time. The Central Bank of Nigeria should be making moves to bring the value of the naira back up again, to make things better for Nigerians and Nigeria especially as we approach the Christmas period.

The FMDQ group’s updates of the Spot and Forward exchange rates showed slight changes here and there, with nothing too heavy. The Spot rate did not see any changes from Monday, as it maintained the high of N405 per dollar and a low of N465.97 per dollar.

The Forward rate however witnessed a jump, with Tuesday’s high jumping back to N411 per dollar from N452 per dollar where it sat on Monday. The lowest of the Forward rate further fell to N457 per dollar from the N453 per dollar where it was on Monday.

Those who would benefit the most from Tuesday’s trading round are those who agreed on future deals at prices between N411 and N415 per dollar.

The daily turnover recorded by the FMDQ group on Tuesday sat at $152.98 million, more than $100 million less than the $256 million which Monday recorded.

On Tuesday, the parallel market saw the Naira trade at N565 per dollar. The Central Bank has however stated that it does not reckon with the parallel market.

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