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Stakeholders Urge CBN to Liberalise Forex Market



Forex Weekly Outlook November 7-11
  • Stakeholders Urge CBN to Liberalise Forex Market

Stakeholders in the financial services industry have urged the Central Bank of Nigeria (CBN) to liberalise the foreign exchange (forex) market and allow the naira to float freely.

This is coming amid concerns that CBN’s decision to stop banks from selling dollars to bureaux de change (BDCs) and the clampdown on BDCs for selling dollar above N400 may worsen the exchange rate at the parallel market.

Though the naira has weakened by 36 per cent since June to around N310 per dollar in the official market, investors believe the exchange rate is still being controlled by CBN.

This has led the FMDQ Over-the-Counter (OTC) exchange to announce the suspension of the FMDQ interbank spot rate, replacing it with the CBN spot rate until the general market structure becomes more credible and transparent.

The naira has fallen to N460 from N335 on the black market in that period as businesses struggle to access foreign exchange from their banks. The depreciation occurred despite continuous intervention by the CBN almost on weekly basis, in the market.

FMDQ Over-the-Counter Securities Exchange Chief Executive Officer, Bola Onadele, accused the CBN of using “strong moral suasion” to prevent the naira from depreciating to a market-related level, and called on the regulator to let the currency float freely.

“The average daily turnover in the spot market used to be $1 billion and now it’s less than $100 million. I don’t believe the parallel market is illegal any more. We have inadvertently legitimised it through some of our actions. It may no longer be as small a market as we used to think. If you have $1,000 to convert to naira, will you sell it at 315? No rational person will do that. You’ll sell to a bureau de change and get N460,” Onadele, a former chief dealer at Citigroup Inc’s Nigerian unit, told Bloomberg.

“No one believes the N305 price of the naira on their screens,” Onadele said, “That devaluation risk is still there. It would only melt away when the market establishes a credible price formation on the back of transparent trading operations by the banks. We need to have proper price discovery.”

Afrinvest West Africa Managing Director, Ike Chioke, said his expectations of further fragmentation of the forex market and a liquidity constraint at the parallel market materialised last week as black market operators refused to sell dollars at the regulatory mandated rate of N400/$1 but willing to buy at N395/$1.00, most likely to hoard.

However, he said the naira/dollar rate at the underground parallel market for operators willing to defy regulatory directives on rate traded between N455/$1 and N465/$1 without liquidity constraints.

Chioke said dollar scarcity at the official market was reaffirmed by drop in daily forex turnover to about $1 billion, while approximately $100 million was recorded as unmet demands.

“Accordingly, investor sentiment remained depressed by currency risk as liquidity crunch lingers. Performance at the parallel market however improved as the naira firmed against the dollar on all trading days of the week amidst reports of dollar sales to Bureau De Change operators by Travelex. Parallel market rates closed at N460 to dollar,” he said.

Meanwhile, security agents have continued to raid the offices of black market currency dealers, detaining some dealers and ordering others to sell dollars at a lower rate in a bid to break the fall of the currency, dealers said.

“The police and state security service officials are raiding black marketers in Lagos and Abuja to compel an appreciation of the naira,” Mallam Adamu, a bureau de change operator, said.

Another trader said security agents visiting BDCs told dealers not to sell dollars for more than N395 but that only created more anxiety in the market, with fears that the practice may worsen exchange rate worries.

“We’ve stopped buying dollars from just anybody that walks into our shop due to the harassment from security agents and a directive from our association,” said a dealer, who asked not to be named.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade long experience in the global financial market.

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Naira Continues Downward Trend on Black Market, Trades at N465/$



Nigeria 500 naira notes

Naira Extends Decline on Black Market, Exchanges at N465/$

Naira extended its decline against the United States dollar on Friday as scarcity amid devaluation persists.

The local currency lost N2 against the US dollar from N463 it traded on Thursday to N465 on Friday. Its lowest in almost three years.

Similarly, the Naira depreciated by N3 against the British Pound from N562 on Thursday to exchange at N565 on Friday.

While against, the European common currency, the Nigerian Naira lost N1 from N505 it was sold on the back market on Thursday to N506 on Friday.

The local currency has been on a downward trend since the news of foreign exchange unification broke out about two weeks ago. This coupled with 5.54 percent devaluation from N360 official Naira-US Dollar exchange rate to N380, compounded Naira woes.

On the Investors and Exporters’ Forex window, the Naira appreciated by 25 kobo or 0.06 percent against the US dollar to trade at N386.50 on Friday.

Activity on the window, however, improved from $11.96 million traded on Thursday to $25.19 million Friday.

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Naira Declines Against Pound, Euro After Devaluation



Naira Declines against pound

Naira Plunges Against Euro and Pound After CBN Adjusts Official Exchange Rate

Following the devaluation of the Naira by the Central Bank of Nigeria, the local currency declined against the British Pound and the Euro single currency on the black market.

The Naira lost N4 against the British pound to trade at N562 from the N558 it traded on Wednesday.

This decline continues against European common currency as the Naira lost N1 from N504 exchanged on Wednesday to trade at N505 on Thursday.

On the Investors and Exporters (I&E) Forex window, the Naira lost 0.06 percent or 25 kobo against the US dollar to trade at N386.75 after plunging to as low as N390 during the trading hours.

Activity on the I&E window declined by 86.4 percent from $103.37 million traded previously to $11.96 million as traded are reportedly stay off the market.

The FMDQ Group, who manages the I&E Fx window, on Wednesday adjusted its CBN’s Naira-USD official exchange rate from N361 on Tuesday to N381 despite the central bank maintaining N360/$ on its official website. Indicating that the apex back has officially implemented the N380 but without an official announcement, likely due to backlash — especially after the CBN has repeatedly said the nations have enough reserves to support the economy and blamed speculators and hoarders for the wide exchange of the local currency.

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Naira Slides to N463 Against US Dollar on Black Market




Naira Falls Against Dollar, Trades at N463 on Black Market

The Nigerian Naira declined against the United States dollar on the black market following the decision of the Central Bank of Nigeria (CBN) to adjust the nation’s official foreign exchange rate.

The local currency depreciated by N2 against the US dollar from the N461 it exchanged on Wednesday to N463 on Thursday after the news of CBN adjustment became known.

The apex bank had adjusted the official foreign exchange rate from the N360 previously used for the US dollar to N380 due to the recent changes in macro fundamentals of the nation.

This is the Naira lowest exchange rate on the black market in almost three years and highlighted the nation’s precarious position especially when the escalating inflation rate of 12.4 percent is factored in.

On Tuesday, United Capital Plc said given current economic situation that the official exchange of the Naira is expected to slide to N430 to a US dollar by the end of the year.

The pan-African investment banking and financial services group said “On the exchange rate, we believe the odds are in favour of a further naira adjustment, which may take the official rate to N410/$ to N430/$ by year-end.

“However, we believe the Central Bank of Nigeria will continue to defend the value of the local unit for as long as it can.”

It went on to predict that the economy will shrink by 2.69 percent in 2020, down from the 2.3 percent growth predicted earlier in the year.

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