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Naira Declines Across Key Foreign Exchange Segments

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Naira Falls Against Foreign Counterparts Across Key Forex Segments

Foreign exchange scarcity amid economic uncertainties continues to dictate the Nigerian Naira value against its global counterparts.

The local currency declined against the United States dollar on the parallel market, popularly called the black market, by N2 from N470 it traded last week to N472 on Monday.

Against the British Pound, the Naira remained unchanged at N575, its lowest in three years. The story wasn’t different with the Euro single currency as Naira succumbed to pressure and plunged by N5 from the N520 it exchanged on Friday to N525.

This decline did not stop on the black market as Investors and Exporters Foreign Exchange Window witness similar depreciation.

The Naira declined to N388.50 against the United States dollar on the I&E FX window, down from N388.40 it opened the day.

Also, activities on the window remained low as investors traded $38.72 million in turnover volume.

While the official rate stipulated by the Central Bank of Nigeria remained at N381 to a US dollar, persistent dollar scarcity continues to weigh on the Naira outlook.

Nigeria’s foreign reserves, used to back the Naira, has been on a downward trend since peaking at $45 billion in June 2019 and currently stood at $36 billion, according to the data from the central bank.

With crude oil trading at $42 per barrel and foreign capital inflow fading away due to global economic uncertainties, businesses and investors are worried the apex bank would soon lose its ability to intervene at the local forex market or support the Naira.

Also, the recent activity of the central bank at unifying the nation’s forex rate after years of saying no alluded to its fading prowess to defend the Naira.

Meanwhile, the central bank-led monetary policy committee on Monday maintained a 12.5 percent benchmark rate.

Mr. Godwin Emefiele, the Governor, CBN, said eight of the 10 members committee voted to maintain the current rates while the remaining two voted for further reduction in rates.

The governor said the members left the rate unchanged to assess the impacts of the recent 100-basis-points rate cut from 13.5 percent to 12.5 percent on the economy as a whole.

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.

Forex

Naira Exchange Rate Improves as CBN Plans to Flood Economy With $20 Billion Diaspora Remittances

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The Naira to US Dollar exchange rate improved by N10 to N490 on Tuesday following the Central Bank of Nigeria’s new directive that allows recipients of diaspora remittances to receive their fund in foreign currency (US Dollar) or via their ordinary domiciliary account.

The move was after the apex bank blamed the parallel market for the wide foreign exchange rate and cautioned analysts for using speculative rates as the real Naira/US dollar rate.

Therefore, the apex bank decided to inject $20 billion annual diaspora remittances into the real sector of the economy and hurt the activities of unscrupulous individuals at the parallel market.

Investors King expects this to gradually moderate the nation’s foreign exchange rate against global counterparts, deepen business activities and fast track economic recovery.

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Forex

CBN Amends Forex Receipt as Naira Hits Record Low

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Naira Dollar Exchange Rate

In a bid to simplify and finally liberalize the receipt of diaspora remittances, the Central Bank of Nigeria (CBN) has amended its receipt procedures to allow beneficiaries of diaspora remittances receive such inflows in foreign currency (US Dollars).

The apex bank stated in a circular signed by Dr. O.S. Nnaji, Director Trade and Exchange Department, CBN.

In the circular, recipients of remittances can now receive funds in either foreign currency cash (US Dollars) or into their ordinary domiciliary account.

While the International Money Transfer Operators (IMTOs) will henceforth receive diaspora remittances in foreign currency through the designated bank of their choice.

The CBN plans to ease forex scarcity, speed up the recovery process and checkmate the activities of speculators and hoarders at the black by injecting diaspora remittances estimated at about $20 billion per year into the real economy.

This is expected to not just improve business activities but also moderate foreign exchange rate from the current N500/US$ and move the central bank a step closer to unifying the nation’s foreign exchange rates.

The circular partly reads “In an effort to liberalize, simplify and improve the receipt and administration of diaspora remittances into Nigeria, the Central Bank of Nigeria (CBN) wishes to announce as follows;

“Beneficiaries of Diaspora Remittances through International Money Transfer Operators (IMTOs) shall henceforth receive such inflows in foreign currency (US Dollars) or into their ordinary domiciliary account. Such recipients of remittances may have the option of receiving these funds in foreign currency cash (US Dollars) or into their ordinary domiciliary account.”

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Forex

Naira Devaluation Pushed Exchange Rate to N500/US$ at Black Market

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NAIRA

Naira to United States Dollar exchange rate plunged to N500 on Monday after the Central Bank of Nigeria (CBN) devalued the Naira by N6 on Friday amid growing scarcity.

At the current rate, the local currency has lost N140 per US dollar when compared with N360 it was sold in the same month of 2019 and N5 compared to N495 it exchanged on Friday.

In an effort to ease pressure on the nation’s foreign reserves and unify foreign exchange rates in line with the International Monetary Fund and the World Bank’s requirement for loans, the CBN devalued the official exchange rate by N6 from N379/US$ to N385/US$ and directed bureau de change operators to sell at N392/US$, up from N386/US$.

However, with importers and businesses looking to meet the usual high demand for goods in December pushing demand for the United States dollar off the roof, Naira’s value has continued to plummet despite efforts by the CBN to prop up its value.

Against the British Pound, the Naira declined to N650, down from N620 it exchanged last week. This depreciation continues against the Euro common currency as the local currency declined to N585.

Lack of liquidity due to the weak foreign reserves, low oil prices and weak demand for the commodity amid production cuts by OPEC and allies is hurting CBN’s ability to effectively intervene at the nation’s foreign exchange markets.

The apex bank usually sells forex to dealers to ease scarcity and facilitate trades. However, lack of foreign revenue generation has forced the CBN to reduce its weekly forex sales to $10,000 per bureau de change operator despite reopening of the economy pushing demand for forex further up.

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