Nigeria’s foreign exchange liquidity increased the most in three months by 204.37 percent after the Central Bank of Nigeria (CBN) pushed dollar supply to banks.
The daily foreign exchange (FX) market turnover rose significantly to $352.07 million on Wednesday from $115.67 million recorded on Tuesday at the Investors and Exporters (I&E) forex window, according to data from the FMDQ.
The increase in turnover was driven by injection of $200 million to all banks by the CBN to meet legitimate needs of the end users.
FX daily turnover rose the most ever to $471.85 million May 26, 2021, after the central bank of Africa’s biggest economy devalued the naira to N410.25k and adopted the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) as the official market.
“The CBN released $200 million early Wednesday to provide confidence and reduce speculation in the FX market,” says Ayodeji Ebo, head of retail investment, Chapel Hill Denham.
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This followed a decision by the banks regulator on Tuesday after the Monetary Policy Committee (MPC) meeting to discontinue the sale of FX to the Bureau De Change (BDC) operators, a development that has led to significant drop in the value of the naira against the dollar.
Before now, the central bank sold about $110 million to BDCs every week. Going forward, Godwin Emefiele, governor of the CBN, said those funds would be made available to commercial banks to meet genuine demand for FX.
Consequently, all banks customers that require FX for legitimate transactions such as school fees, Personal Travel Allowance (PTA), Basic Travel Allowance (BTA) and medical payments would be required to undergo minimal documentation to assess dollar.
Johnson Chukwu, managing director/CEO, Cowry Asset Management Limited, is concerned that the banks do not have the wherewithal to meet the demand of the informal sector of the economy that need dollars for their daily business operations.
However, the improvement in the FX liquidity helped to shore up the value of naira marginally on Wednesday.
Naira on Wednesday appreciated marginally by 0.02 percent as the market closed at N411.60 per dollar as against N411.67/$ closed on Tuesday at the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window.
At the parallel market, on Thursday, the naira depreciated again by 0.57 percent to N525 per dollar compared with N522/$ traded on Wednesday.
Nigeria’s currency on Wednesday hit N522 per dollar as traders in the parallel market, popularly known as the black market, were seen hoarding dollars for fear of losing money.
In a latest development, Nigerian deposit money banks on Thursday assured the public of their readiness to carry out the function of providing FX services to customers as directed by the CBN.
Herbert Wigwe, group managing director/CEO, Access Bank, disclosed this to journalists at a zoom meeting on Thursday.
This followed a decision by the banks regulator on Tuesday after the MPC meeting to discontinue the sale of FX to the BDC operators, a development that has led to significant drop in the value of the naira against the dollar.
The banks’ CEOs present at the meeting unanimously agreed that they have the infrastructure and the capacity to meet the legitimate FX demand of the end users.
