Exchange rates converge at N367/$

The foreign exchange market recorded the most achievement yesterday (Wednesday) with a noticeable convergence between the investors and exporters window (I&E) and the black market. The US dollar was quoted at the rate of N367/$ at both markets, after trading yesterday.

The investor and exporters window has since April 21, 2017 recorded a total of $2.2 billion in transaction volume.  With the current rate, the naira, which traded at N520 per dollar in January and early February, has gained about N153 or 29.42 percent on the dollar.

Analysts said last night, that the development is an indication of rising confidence, occasioned by sustained intervention of the Central Bank of Nigeria (CBN) in the market.

The CBN has been intervening in the official market, in an effort to narrow the spread between the official interbank and black markets. It has sold over $4 billion since February, improving dollar supply and providing support for the naira.

Godwin Emefiele, governor of CBN, had vowed to ensure a convergence between the multiple rates in the foreign exchange market, at the conclusion of its monetary policy meeting, where key rates were left unchanged, in line with market expectations.

The CBN has reiterated its commitment to keep dollar sales steady, until it crushes currency speculators and there is a convergence of the official and parallel market rates.  Much of the dollar demand had been a bubble, created by speculators and hoarders of the foreign currency who are being blown away, in line with Emefiele’s promise.

Kabir Okunlola, partner, audit services, KPMG Professional Services, said the CBN has been persistent in dollar supply which has helped in bringing down the exchange rates. Okunlola added that people who do not have any business in the foreign exchange market are out of the market.

“We expect convergence to continue, as long as the CBN continues to supply dollars to meet genuine demand”, Okunlola told BusinessDay by phone.

Ayodeji Ebo, managing director, Afrinvest Securities limited, expect rates to converge at the Nigerian Autonomous Foreign Exchange (NAFEX), which is not a pegged market.

Ebo, who also spoke with BusinessDay by phone, said the convergence of rates is an indication of confidence in the market, as investors are getting value in their transactions. He added that there is moderation in activities and that this would help importers and authorised dealers to plan ahead.

The NAFEX window gave portfolio investors a currency market they could access after two years of market-destroying forex illiquidity, according to Renaissance Capital. After a hesitant start, foreign inflows began to pick up, and the stock market reacted sharply, consequently.

Isaac Okorafor, acting director, corporate communications, at the CBN, expressed confidence that the interventions will continue to guarantee stability in the market and ensure availability to individuals and business concerns.

Africa’s highest oil producer has multiple exchange rates, which include the official one, a rate for muslim pilgrims travelling to Saudi Arabia, one for school fees abroad and a retail rate set by licensed exchange bureaux.

 

HOPE MOSES-ASHIKE