The Naira depreciated against the dollar to close at N465/$1 on Wednesday.
Nigeria's exchange rate at the NAFEX window remained stable for the third consecutive trading day to close at N386/$1 during intraday trading on Wednesday, September 16.
In sharp contrast, the naira remained depreciated to close at N465/$1 at the parallel market as the ban on forex allocation for food and fertilizer imports seems to be putting pressure on the market.
Currency Developments
· The local currency has strengthened by about 7.8% within the last one week at the black market, as the Central Bank of Nigeria introduced some measures targeted at exporters and importers in order to try to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders.
· The CBN has sold over $150 million to BDCs since the resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
· However, the exchange rate against the dollar has failed to sustain the initial gains made after the CBN announced plans to provide liquidity.
· BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders as it was inadequate to meet their expenses.
· We also noted that forex traders monitored during the previous week appear to hoard forex as they anticipated further depreciation in the market.
· There has been a sharp drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.
