The exchange rate in the parallel market fell to another new 3-year low close at N472 / $ 1 on Monday, July 20, 2020. However, in the officially recognized NAFEX market, currency turnover increased by 4.5% while the exchange is maintained. it remained stable closing at N388.50 / $ 1.
Parallel Market: On the black market where forex trading is unofficially traded, Naira has depreciated N2 by one dollar to close N472 to one dollar on Monday, according to information from AbokiFX, a leading FX tracking website. This goes against the N470 with a dollar exchange on Friday of last week. An independent check of Nairametrics research shows that the exchange rate sold up to N473 / $ 1 according to the FX tracker. Nairametrics already collects parallel market exchange rates in 2017.
NAFEX: Nair’s stable remained stable against Monday’s investor and exporter (I&E) threshold, closing at N388.50 / $ 1, this was the same rate as reported on Friday, July 17. The indicative opening rate was N388. 40 to a dollar on Monday. This represents a kobodrop compared to N388.07 with a doll registered on Friday. The exchange rate disparity between the official NAFEX rate and the post market rate widened on Monday and is now a huge N84.
Nigeria maintains multiple exchange rates that include the official CBN, BDC, SMIS and NAFEX rate (I&E window). Nairametrics was informed a few weeks before the government implemented plans to unify the multiple exchange rate in accordance with the requirements of the World Bank. Nigeria is seeking a world bank loan of up to $ 3 billion. The country has been pressured by the International Monetary Fund and the World Bank for monetary reforms.
Meanwhile, foreign exchange turnover in the Investors and Exporters (I&E) window increased on Monday, July 20, 2020, as it gained 4.5% day by day. According to data tracked by Nairametrics, currency turnover increased from $ 37.04 million on Thursday, July 16, 2020 to $ 38.72 million on Friday, July 17, 2020. This billing that still persists reaffirms the shortage of dollars and also an indication of liquidity pressure in the currency market. This is reflected in the non-improvement in the exchange rate. In addition, revenue is less than the $ 200 million recorded on the main trading days in recent weeks.
Nairametrics was informed a few weeks before the official CBN rate was changed from N360 to a dollar to N381 in its SMIS window where forex is sold to importers and SMEs.
Nairametrics reported that currency turnover in the NAFEX window, where investors and exporters trade currencies, was around $ 1.57 billion between June 2020 and July 17, 2020, which is not meeting demand according to the reports. This is based on daily market turnover data monitored by the FMDQOTC website in the past few weeks. Currency turnover averaged $ 47 million in the last 32 days.
According to a recent FSDH research report, currency inflows in the I&E window decreased significantly in the second quarter of 2020 after lower inflows of foreign portfolio.
The consequent effect of COVID-19 on oil prices has limited the ability of the Nigerian Central Bank to intervene further in the foreign exchange market, while the inflow of dollars continues to decline despite the increase in demand.
Bloomberg reported that the dollar shortage in Nigeria is worsening with the weakening of the black market naira and that banks are limiting the dollar spending limit of their overseas customers using naira debit cards.
Investment One analyst Douye Mac-Yoroki said: “Many of the challenges at the moment are due to a shortage of liquidity. The central bank is withholding as many dollars as possible as the inflows are not coming in like before. Clients who cannot obtain dollars from the central bank or other official sources are forced to enter the parallel market, pushing the rate upward. ”
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“There is a lot of pressure there,” he said.
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The low inflow of foreign exchange is mainly due to low remittances and low oil prices (accounting for around 90% of the country’s foreign exchange earnings) caused by the coronavirus pandemic. This is also exacerbated by the suspension of foreign exchange sales to the operators of the Exchange Office (BDC).