Naira falls sharply to N473.50k despite CBN’s increased dollar sales

Speculative activities continue in Nigeria’s foreign exchange market as the local currency on Friday fell sharply by N6.50k per dollar on the black market, the weakest in six weeks, despite increased dollar sales by the Central Bank worth $1.9 billion in October 2020.

Traders said on Friday that there was increased demand for dollars by end users amid scarcity of the greenback.

Some importers whose demands are not being met at the official market, go to the autonomous market to source for dollar.

“We are now looking to buy forex from the parallel markets and you know the rate at which parallel markets go, Sam Ohuabunwa, President of the Pharmaceutical Society of Nigeria ( PSN), said while speaking on the CBN’S N100 billion Health Sector Intervention fund at a virtual conference organised by Finance Correspondents Association of Nigeria (FICAN) in Lagos recently.

Consequently, dollar sold for an average rate of N473.50k on Friday as against N467 traded on Thursday on the black market.

While dollar sold for N474 at Festac Town, it traded at N473 at Lagos airport. Traders were buying at N470 from individuals amid short supply.

The CBN sold $540 million to the Small and Medium Enterprises (SMEs), Invisibles and Secondary Market Intervention Sales (SMIS), (retail and wholesale) segments as compared to $400 million in September 2020, according to a report by FSDH research.

Naira weakened by N1.00k as the dollar traded at N465 on Friday from N464 traded on the previous day at the Bureau De Change (BDC) segment of the foreign exchange market.

The Apex bank sells $10,000 to BDCs twice a week and has sold over $500 million to over 5,000 operators across the country, since September 2020.

At the Investors and Exporters (I&E) forex window, Naira weakened by 0.09 percent as the dollar was quoted at N386.00 as against the last close of N385.67. Analysts at FSDH research said most participants maintained bids between N383.00 and N393.57 per dollar.

At the money market, the Nigerian treasury bills secondary market closed on a positive note on Friday with the average yield across the curve declining by 34 bps to close at 0.11 percent from 0.45 percent on the previous day. Average yields across short-term, medium-term, and long-term maturities compressed by 41 bps, 65 bps, and 12 bps, respectively.

At the Primary Market Auction held on November 11, the CBN allotted NT-Bills worth N167.81 billion across the 91-day (N19.78 billion), 182-day (N10.00 billion), and 364-day (N138.03 billion) tenors at stop rates of 0.04 percent (-30 bps), 0.15 percent (-35 bps), and 0.30 percent (-68 bps) respectively.

The average yield across the three tenors stood at 0.16 percent, the lowest return payable on a debt instrument in recent times. Despite the low yield environment prevailing in the NT-Bills market, investors were willing to buy up to N603.12 billion due to the robust system liquidity.