- Forex: CBN’s Lending to Banks Rises to N1.6tr
BankS’ borrowing from Central Bank of Nigeria (CBN) rose sharply to N1.6 trillion last week, triggered by demand for funds to participate in the special foreign exchange auctions conducted by the apex bank.
Under the CBN forex rule, banks are to provide the Naira equivalent of dollar purchases from the CBN. During the week, the CBN conducted two 60-days forwards sale of $600 million to the banks. This triggered intense demand and acute scarcity of funds in the interbank money market, which prompted banks to besiege the Standing Lending Facility (SLF) of the CBN to borrow the Naira required to fund their dollar purchases.
Average Daily Borrowing
Consequently, banks borrowing shot up by 98 per cent to N1.6 trillion last week, from N821.4 billion the previous week. Similarly, average daily borrowing through the SLF jumped to N321 billion last week from N205 billion the previous week.
Investigation reveal that most of the borrowing occurred on Wednesday, during which banks took N433 billion to fund the $370 million sold on Tuesday by the CBN.
The apex bank had offered $500 million 60-days future on Tuesday. According to a CBN official who confirmed this development to Financial Vanguard under condition of anonymity, most of the banks did not have the Naira to buy the dollars offered by the apex bank, hence only $370 million was sold that day. A similar situation re-occurred on Thursday when banks borrowed N392 billion to participate in the $230 million sold by the apex bank that day.
Meanwhile, amount of idle cash (liquidity) in the interbank money market fell by 74 per cent during the week, in response to the intense demand for funds triggered by the CBN dollar sales. From N175.29 billion on Monday, market liquidity fell steadily closing the week at N45.65 billion. This was despite inflow of N412 billion comprising N198 billion through matured treasury bills and N214 billion from statutory allocation funds.
This prompted wide volatility of interbank interest rates during the week, with interest rate on Overnight borrowing climbing to 200 per cent on Thursday from 17 per cent the previous week, before dropping to 175 per cent at the close of business on Friday.
However, the CBN dollar sales halted the depreciation of the Naira in the parallel market, where it posted its biggest weekly appreciation against the dollar last week. Market survey revealed that the Naira exchange rate in the parallel market dropped from N520 per dollar the previous week to N460 per dollar at the close of business on Friday.
Analysts however project that the Naira appreciation may be short-lived saying that the Naira might lose some of the appreciation recorded last week.
“Parallel market will appreciate towards N460 per dollar before bouncing back to N480 per dollar in a cobweb movement,” analysts at Financial Derivatives Company projected.
Also analysts at Afrinvest Plc, a Lagos based investment firm stated: “It is hard to make an exact call on direction of rate, but it is unlikely the parallel rate will breach the N500 per dollar mark again in the shorter term as a more dollar liquid CBN will not shy from further interventions.
Yet, our medium term conviction remains that maintaining the interbank rate at current peg (without implementing deeper reforms required) will lead to deterioration in current account as more demand surfaces. Hence, there is still a need to address the FX liquidity challenge appropriately and we reaffirm our view that increased flexibility will be needed in order to allow restore investor confidence and boost autonomous FX supply.”
Exchange Rate: Dollar to Naira Today, Friday 3 December 2021
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.
|12/1/2021||SOUTH AFRICAN RAND||25.936||25.9993||26.0626|
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.
Access Bank Naira Exchange Rates
Sterling Bank Naira Exchange Rates
Union Bank Naira Exchange Rates
UBA Naira Exchange Rates
Naira Sees Stability at Official Window
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.
Naira Stabilizes at N415/$1 at Official Fx Window
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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