The Nigerian naira recorded a gain of 0.66% on the parallel market, often referred to as the black market, following the commencement of a new foreign exchange (FX) rule by the Central Bank of Nigeria (CBN) on Monday, July 1.

The naira was quoted at N1,510 per dollar on the black market, improving from the N1,520 quoted on Friday.

This data, gathered from street traders and various online data platforms, highlights a positive response to the CBN’s latest policy change.

One street trader attributed the naira’s gain to a reduction in dollar demand by end-users, coupled with an improved supply of the currency.

“We saw less frantic buying of dollars today, which helped the naira to strengthen. But it’s hard to say if this trend will hold,” he commented.

The recent policy shift by the CBN involves the discontinuation of its Price Verification System (PVS) Portal, a move effective from July 1, 2024.

The PVS Portal was initially launched to ensure that the prices of goods and services for foreign exchange transactions were accurately verified, preventing over-invoicing and under-invoicing, and thereby promoting fair pricing in Nigeria’s import and export activities.

In a circular issued by W.J. Kanya, acting director of the Trade & Exchange Department, the CBN referenced the previous circular dated August 17, 2023, which had announced the “Go-Live” of the PVS Portal.

The new directive stipulates that all applications for Form ‘M’ will no longer require a price verification report from the PVS Portal, effectively streamlining the process for authorized dealer banks and the general public.

This policy change aims to reduce the procedural burdens associated with foreign exchange transactions, potentially leading to a more efficient and fluid market.

Stakeholders in the banking and finance sectors are advised to take note of these changes and adjust their procedures accordingly.

The immediate impact of this policy shift has been a welcome relief for the naira, which has been under significant pressure in recent months.

However, experts and market participants are adopting a wait-and-see approach to determine if these gains can be sustained over the longer term.

“The CBN’s decision to scrap the PVS Portal could indeed simplify the forex transaction process, but we need to see consistent policy implementation and supportive measures to ensure these gains are not just temporary,” noted a financial analyst.

As the new system takes effect, further guidance and updates from the CBN are anticipated.

The financial community is closely monitoring the situation, hopeful that this move will contribute to greater stability and resilience in the Nigerian foreign exchange market.

Nigeria’s money supply (M3) soared to an all-time high of N99.23 trillion in May 2024, according to data released by the Central Bank of Nigeria (CBN).

This significant increase comes despite the CBN’s efforts to tighten monetary policy.

M3, which is a broad measure of the money supply within an economy, rose by 2.33 percent from N96.97 trillion in April 2024 and by 7.46 percent from N92.34 trillion in March 2024.

M3 includes various types of liquid assets that are readily available for spending or investment, such as currency, checking deposits, and savings deposits up to two years, as well as larger time deposits, institutional money market funds, and short-term repurchase agreements.

The unprecedented rise in M3 highlights a complex economic landscape where monetary tightening measures by the CBN have not curbed the increase in liquid assets within the economy.

This raises questions about the effectiveness of the current monetary policies.

Also, the data shows that the currency in circulation increased by 1.02 percent to N3.96 trillion in May 2024 from N3.92 trillion in April 2024.

On a quarterly basis, currency in circulation rose by 2.59 percent from N3.86 trillion in March of the same year.

Credit to the private sector also saw an uptick, reaching N74.31 trillion in May 2024, a 1.92 percent rise from N72.91 trillion in April 2024.

This increase in credit indicates ongoing economic activity and potential growth opportunities for businesses, even as the broader money supply continues to expand.

Currency outside banks rose to N3.70 trillion in May 2024, marking a 2.77 percent increase compared to N3.60 trillion in April 2024.

This suggests a higher demand for cash transactions despite the growing emphasis on digital and cashless payment systems.

The surge in Nigeria’s money supply comes amid various economic reforms and policies aimed at stabilizing the nation’s economy.

CBN reforms have driven investment inflows to a four-year high, showcasing a renewed investor confidence in the Nigerian market.

However, this rise in money supply could pose challenges, such as potential inflationary pressures, which the CBN will need to address.

In related news, a report indicates that several Nigerian states, including Kogi, Kano, and Oyo, may struggle to pay the new minimum wage, highlighting ongoing fiscal challenges at the state level.

Meanwhile, the aviation sector is experiencing issues as airlines’ staff and touts are capitalizing on plane shortages, further complicating the economic environment.

As Nigeria navigates these complexities, the record high in money supply underscores the need for careful economic management and policy adjustments to ensure sustainable growth and stability.

Nigeria’s diaspora remittances rose to $19.5 billion in 2023, according to the latest Migration and Development Brief from the World Bank.

Despite falling slightly short of the projected $20 billion, this figure remains the highest in the sub-Saharan African region, accounting for 35% of the total remittances received in the area.

The report highlights the critical role remittances play in supporting the Nigerian economy, surpassing foreign direct investment (FDI) and official development assistance (ODA) in terms of financial inflow.

The World Bank’s report underscores the importance of leveraging remittances to combat poverty and finance key needs such as health, education, and financial inclusion.

While acknowledging that remittances cannot replace FDI or ODA, the report emphasizes the resilience and significant impact of these funds in supporting the country’s economic stability and development.

“Developing countries need FDI, especially in critical infrastructure and green investments, and ODA to address public financing needs and externalities such as fragility and climate change,” the report stated.

“However, countries must recognize the size and resilience of remittances and find ways to leverage these flows for poverty reduction and other key areas.”

Despite the high volume of remittances, sub-Saharan Africa continues to face the highest remittance costs globally, averaging 7.9%.

These costs encompass bank charges, money transfer operator fees, and various duties, which can reduce the net amount received by beneficiaries.

Also, the report notes that non-transparent foreign exchange markups often mask these fees, further impacting the final amount received.

The report also pointed out that in countries with multiple exchange rates, remittances often flow through unregulated channels, depriving recipient countries of vital foreign exchange.

This practice is prevalent in Nigeria, where many remittances are sent through informal routes, avoiding the official exchange rates and contributing to the externalization of funds.

Earlier this year, Taiwo Oyedele, Chairman of the Presidential Committee on Fiscal Policy and Tax Reforms, highlighted the discrepancy between reported remittances and actual inflows during a panel discussion at the 2024 Economic Outlook and Budget Analysis organized by the Lagos Chamber of Commerce and Industry.

Oyedele noted that while the World Bank estimated Nigeria’s diaspora remittances at $20 billion for 2023, more than 90% of these funds did not enter the country formally.

“We have spoken to many Nigerians almost everywhere, and they told us how they send money now. They use digital apps that utilize parallel market rates, crediting naira in Nigeria without bringing in the dollars,” Oyedele explained.