The naira depreciated to N1,534 per US dollar in the official foreign exchange market yesterday, February 12, 2024 from N1, 469.97/US$ on Friday and N1,479.47/US$ on Thursday last week.
Data from FMDQ showed that the indicative exchange rate for the Nigerian Foreign Exchange Market (NAFEM) fell below that of the unofficial market, reports Nigerian Tribune.
At the parallel market, the local currency also lost some grounds as it closed at N1, 495/US$ from N1, 490/US$ to the dollar on Friday, February 9, 2024, according to Bureau De Change sources.
The local currency closed against the British Pound Sterling (GBP) on Monday at N1,895/£ while the naira to Canadian dollar closed at N1,200/CAD.
Meanwhile, at the parallel market, the exchange rate at one point reached N1,505/$1 but eventually settled at N1,500/$1, losing 4.33 percent last week.
The larger decline in the parallel market created a 2.11 percent gap between the street and the official market.
The Central Bank of Nigeria’s (CBN’s) published gross external reserves declined 0.71 percent to close the week at $33.12 billion.
The impact of the CBN’s directive to banks to sell down part of their net long US dollar positions seemed to have been short-lived, even if turnover in the foreign exchange markets did improve significantly for a while according to analysts.
The gap between the parallel and the NAFEM market has reopened, however. This further reinforces the need to improve the supply of US dollars into the market and “we wait to see whether the reforms attract foreign portfolio investors and encourage other flows,”says analysts from Coronation Research.
In searching for way forward in the foreign market, the CBN Governor Olayemi Cardoso noted several strategies are in place to enhance liquidity and price discovery in the market.
These include unifying Forex market segments, clearing outstanding Forex obligations, introducing new BDC operational mechanisms, and enforcing banks’ Net Open Position (NOP) limit amongst others.
Recall that Mr Cardoso in an interview earlier in the previous week stated that out of the $7.0 billion Forex backlog inherited, the CBN had cleared $2.5 billion in verifiable claims, with $2.2 billion outstanding and $2.4 billion having irregularities.
The governor noted that all these measures would stabilise the exchange rate, deepen the FX market into a more market-oriented mechanism, and restore investors’ confidence in the financial markets.