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Naira Drops to 498 as CBN Resumes Dollar Sales

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  • Naira Drops to 498 as CBN Resumes Dollar Sales

The naira fell against the United States dollar at the parallel market to 498 on Thursday, from 497 on Wednesday.

This came hours after the Central Bank of Nigeria resumed dollar sales to Bureau De Change operators through Travelex.

Before dropping to 498, the naira had appreciated to 495/dollar early on Thursday.

The currency traded flat at 497/dollar consecutively between Monday and Wednesday.

Economic and financial experts said the resumption of dollar sales to the BDCs by the CBN through Travelex would help boost the naira.

The local currency has been under persistent pressure owing to scarcity of dollar in the economy.

Economic and financial experts are divided over the outlook of the naira and most economists believe the local currency would continue to fall against the greenback unless the CBN reviewed its monetary and foreign exchange policy.

According to an economic expert, Mr. Henry Boyo, the currency monetary policy framework adopted by the CBN is flawed and there is an urgent need for the central bank to jettison it for a framework that can take the country off the current economic challenges.

He stressed that unless this was done, the rising oil prices would not make the economy better.

Boyo said, “The oil revenue is not the problem; the primary cause of the oppressive dilemma is the distortional process the CBN adopts for infusing the dollar revenue into the domestic money market to drive economic growth.

“President Muhammadu Buhari must be disturbed that the naira exchange rate has suffered so poorly under his watch, particularly after he promised parity between the naira and dollar, if he won the election.

He added, “Unfortunately, the worst has yet to come, because, if crude oil price further rises while output remains favourable, the dollar will paradoxically spike well above N500/$1 and may approach N1000/$1 before December 2017!

“Any attempt to bridge the widening gap between official and parallel market exchange rates will devalue the naira and trigger a steep rise in fuel price to shoot inflation well beyond 20 per cent and make Nigerians poorer still.”

“We will continue to see reasonable volatility of the naira during the first half of this year. The fundamental issues underlying the volatility of the naira have not been addressed,” a currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said.

According to Ezun, the naira will continue to depreciate at the parallel market while the CBN will keep managing the official rate around 305/dollar.

“It will depreciate further but there has been some resistance around 500/dollar. The CBN seems to have come to the end of monetary policy because it is the issue of liquidity,” the Ecobank analyst added.

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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Naira

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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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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