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Naira Extends Gains, Moves Towards Convergence with FX Rate for Invisibles

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500 and 1000 naira bills (Nigerian currency)
  • Naira Extends Gains, Moves Towards Convergence with FX Rate for Invisibles

Currency speculators and others who had stockpiled the greenback continued to count their losses on Thursday, when the naira extended its gains on the parallel market and inched closer towards a convergence between the street price for the dollar and the rate offered by the Central Bank of Nigeria (CBN) for invisible transactions.

The naira sold for between N380 and N385 in Lagos on Thursday, stronger than N399 from the previous day.

The FX rate for invisibles has remained at N375 since the CBN announced new policy measures for the FX market a month ago.

The central bank also sustained its intervention by auctioning an additional $100 million through wholesale FX forwards to banks for onward sale to their customers in all sections of the economy.

Of the $100 million offered by the CBN, $91 million was taken up by currency dealers.

Confirming this, CBN spokesman Isaac Okorafor said dealers would get value for their respective bids on Friday.

He disclosed that the highest and marginal bid rates were N330/$1 and N320/$1, respectively, adding that no intervention was made by the central bank to meet requests for invisibles on Thursday.

On the parallel market, the nation’s currency has appreciated by 27 per cent, or about N140, from N525 to a dollar a month ago.

The central bank has been intervening aggressively on the official market in recent weeks, leading to a narrowing of the gap between the official and parallel market rates.

CBN Governor, Mr. Godwin Emefiele, on Tuesday expressed optimism about the convergence of the rates on the official and parallel markets, stating that the gains made by the naira against the greenback in recent weeks was not a fluke.

Emefiele said he was happy that the central bank’s intervention was yielding positive results.

But THISDAY gathered on Thursday that while the central bank has succeeded in substantially clearing backlog of dollar demands for retail invisibles, it was falling short of meeting the FX demand for capital repatriation and other wholesale invisibles.

A chief executive of one of the leading banks in the country, who confirmed this in a chat, however pointed out that this could be a strategy by the CBN.

“While the CBN has done a lot in the past one month, we must not forget that there is a backlog of investors who are trying to repatriate capital that has not been settled.

“The CBN was focusing on trade transactions previously and recently on school fees, PTA/BTA. But foreigners who had invested in bonds, equities and need to repatriate dividend payments are still behind on the queue.

“I want to assume that once the central bank sorts out the retail invisibles, it would start to attend to FX demand for capital repatriation,” the bank CEO who did not want his name in print said.
The country’s external reserves, meanwhile, closed at N30.347 billion on Thursday.

‘CBN Must Not be Politicised’

Meanwhile, a professor of law and Senior Advocate of Nigeria (SAN), Prof. Epiphany Azinge, has advocated the complete independence of the CBN.

This came against the backdrop of the reported call by the Minister of Finance, Mrs. Kemi Adeosun, for the reduction of powers of the central bank.

The minister was reported to have blamed the CBN for the disconnect between the fiscal and monetary policies of government.

Azinge, while speaking on Thursday as a guest on Arise News Network, the sister broadcast arm of THISDAY, said the call was unprecedented.

He said: “In line with global best practices, we came to the stage where it was widely agreed that the independence of the CBN was very, very important and critical for the sustenance of the monetary policies of this country and to that extent, the Act clearly stipulated that there shall be an independent body known as the CBN that will be free to discharge its functions. And that independence is very critical.”

According to him, “Firstly, the substantive law in force hinders towards the 1991 Act which we operated from many years until the coming into force of the 2007 Act, which is the extant law for now.

“What that means is that before promulgating the 2007 law, a lot went into it in terms of discussions, conversations, analysis and what have you.

“Also, we must have it at the back of our minds that it’s something that has resonated over the years. Scholars have obviously engaged in this discussion for a very long time and generally, the consensus at this point in time is that independence is very, very fundamental.”

He was of the view that the minister’s argument that the CBN needs more checks and balances holds no water, adding that it would only amount to undue interference.

“The last thing that we should be thinking of is the politisation of such a body, because the core mandate of the CBN is such that once it is subordinated to politisation, obviously everything is thrown out of the window,” he added.

Azinge explained that the issue of formulation and implementation of policies by the finance minister maybe at the realm of government and have nothing to do with the core mandate of the body charged with the responsibility of ensuring price and monetary stability, among other functions, including the issuance of legal tender.

On the checks and balances inherent in the CBN Act, Azinge said: “The composition of the board that is charged with the responsibility of supervising the CBN, as it were, is quite clear.

“There is a chairman aside the governor, we have four deputy governors, there is also the permanent secretary of the Ministry of Finance who is on the board. Then there is also the Accountant General of the Federation.

“So that essentially gives the minister a seat. Whatever you want to do can be done through the instrumentality of your permanent secretary who is possibly there in a representative capacity.”

He further stated that the minister’s statement might not get the backing of legislature and expressed doubt that the National Assembly would respond to her call to reduce the powers of the CBN.

“Even at that, that will be subjected to a lot of serious debate and I don’t think that much can come out of it. Because again, the CBN governor reports to the president on some of the issues and of course, the National Assembly is there with oversight functions, so they are also in a position whereby reports can also be made available to the National Assembly.

“So, there is no complete disconnect. But to think that the Minister of Finance is in charge of finance and to that extent, the CBN should be subordinated to the whims and caprices of the minister as the case maybe, to me, is not the right idea,” he said.

He added: “When we are talking about power, we should at any point in time be thinking of the equivalent in other jurisdictions and climes. Even starting from Africa and all over the world, the modules that we are practising is fashioned along the lines of modules all over the world.

“And I believe for now, we are in line and in conformity with the best practices and to that extent, we are on the right course.”

He said though the presidency might have the best of intentions, the management of the economy, especially with respect to monetary policies, should be left to technocrats to handle.

“I believe that we have more than competent hands, in terms of technocrats to handle that. I believe that it is better to allow the technocrats to run the issue of monetary policies in this country,” he maintained.

Recalling that from 1991 to 2007, monetary policies in the country experienced fits and starts, Azinge noted that from 2007, the former CBN governor, Prof. Chukwuma Soludo, was able to re-engineer the whole process by getting the National Assembly to come to terms with the reality that Nigeria was off the mark and it needed to align with global practices.

“And from 2007 to 2017, which is about 10 years or thereabouts, I don’t think that we have missed out much in the process,” he said.

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 Recent Gain Reflects Policy Direction, Says CBN Chief Olayemi Cardoso

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Naira Exchange Rates - Investors King

Olayemi Cardoso, Governor of the Central Bank of Nigeria (CBN), has explained that the recent surge in the Naira is a testament to the positive direction of government policies rather than active intervention to defend the currency’s value.

Addressing attendees at the spring meetings of the International Monetary Fund and World Bank in Washington, Governor Cardoso underscored that the CBN’s intention is not to artificially prop up the Naira.

He clarified that the fluctuations observed in the country’s foreign exchange reserves were not aimed at defending the currency but rather aligning with broader economic goals.

Over the past month, the Naira has experienced a notable uptick in value against the dollar, signaling a reversal from previous declines. Data from Bloomberg reveals a 6.4% decrease in liquid reserves since March 18, coinciding with the Naira’s rebound.

Despite this decline, Cardoso pointed out that around $600 million had flowed into the reserves in the past two days, reflecting confidence in the Nigerian market.

Governor Cardoso articulated the CBN’s vision of a market-driven exchange rate system, emphasizing the importance of allowing market forces to determine exchange rates through willing buyers and sellers.

He expressed optimism about a future where the central bank’s intervention in the foreign exchange market would be minimal, except in extraordinary circumstances.

The recent resilience of the Naira follows a period of volatility earlier in the year, marked by a substantial devaluation in January. Since then, the CBN has implemented measures to stabilize the currency, including monetary tightening and initiatives to enhance dollar liquidity.

Cardoso highlighted the transformation in market sentiment, noting that investors now perceive Nigeria’s central bank as committed to stabilizing inflation and fostering economic stability.

As Nigeria continues its journey toward economic recovery and stability, Cardoso’s remarks provide insight into the central bank’s strategy and its impact on the country’s currency dynamics.

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Naira

Dollar to Naira Black Market Today, April 18th, 2024

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 NGN in the black market, also referred to as the parallel market or Aboki fx.

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New Naira Notes

As of April 18th, 2024, the exchange rate for the US dollar to the Nigerian Naira stands at 1 USD to 1,020 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 N1,050 and sell it at N1,040 on Wednesday, April 17th, 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: N1,020
  • Selling Rate: N1,010

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Naira

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

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New Naira notes

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.

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