Fresh pressure was witnessed in the foreign exchange market on Thursday as Nigeria’s currency weakened by 0.42 percent to exchange with the dollar at N478 as against N476 on Wednesday on the black market.
Traders attributed the Naira depreciation to increased demand for the greenback by the end users. The foreign exchange market has been under pressure since March 2020 following a sharp drop in oil prices as a result of Covid-19 pandemic.
However, Naira gained 1.04 percent as the dollar was sold at N475 at the Bureau De Change (BDC) segment of the market on Thursday from N480 on Wednesday.
At the I&E FX market, Naira appreciated by 0.17 percent as the dollar was quoted at N394.00 as against the last close of N394.67. Analysts at FSDH research said most participants maintained bids between N388.00 and N407.68 per dollar.
The daily foreign exchange turnover increased by 9.61 percent to $219.60 million on Thursday from $200.34 million recorded on Wednesday, data from the FMDQ indicated.
Total foreign exchange sales to authorised dealers by the Central Bank of Nigeria (CBN) amounted to US$4.37 billion in the third quarter(Q3) of 2020, a decline of 2.3 per cent from the level of $4.47 billion in the preceding quarter.
This was attributed largely to the decrease in wholesale forward intervention and interbank sales. The total foreign exchange salesrepresented a decrease of 56.4 percent, compared with the corresponding quarter of 2019, according to the CBN’s economic report for the third quarter of 2020.
Further disaggregation showed that matured swap transactions and Secondary Market Intervention Sales (SMIS) intervention rose by 50.8 per cent and 0.7 per cent to US$1.24 billion and US$1.96 billion, from the levels in the preceding quarter.
However, interbank sales, interventions at the Investors and Exporters (I&E) window and SME fell by 22.3 percent, 18.7 per cen and 3.5 per cent to US$0.15 billion, US$0.39 billion and US$0.30 billion relative to their levels in the preceding quarter. Foreign exchange cash sales to BDCs was US$0.33 billion in the review period.
The apex Bank through its periodic interventions in the foreign exchange market continued to boost the supply side of the market, as COVID-19 crisis weakened the private sector supply chain segment of the market.
Foreign exchange inflow through the CBN decreased in the third quarter of 2020, largely due to a reduction in non-oil inflow. During the review period, aggregate foreign exchange inflow through the CBN stood at US$6.97 billion, a decrease of 30.7 per cent and 43.6 per cent below the levels in the second quarter of 2020 and the corresponding quarter of 2019, respectively.
The development was attributed to a decline in both oil and non-oil receipts by 9.7 per cent and 44.7 per cent, respectively, below the levels in the preceding quarter and corresponding quarter of 2019. The decrease in non-oil receipts followed reversion to normal trend after the one-offIMF facility in the previous quarter, while that of oil receipts was as a result of the weak global demand for crude oil, owing to fragile global economic recovery.
Disaggregation of inflow through the Bank indicated that oil and non-oil receipts were US$2.35 billion and US$4.62 billion, respectively.
Further analysis of non-oil receipts showed that interbank swaps, other official receipts, and Treaury Single Account (TSA) & third-party receipts increased by 255.6 per cent, 40.4 per cent and 6.8 per cent to US$1.60 billion, US$0.99 billion and US$0.95 billion over their respective levels in the second quarter of 2020.
However, foreign exchange purchases, Deposit Money Bank (DMB)cash receipts and unutilised International Money Transfer Operation (IMTO) funds, declined by 14.9 per cent, 68.1 per cent and 11.5 per cent to US$0.56 billion, US$0.10 billion and US$0.24 billion, below the levels in the preceding quarter, respectively. Unutilised funds from FX transactions, returned payments and interest on reserves & investments fell to US$0.09 billion, US$0.02 billion and US$0.06 billion, respectively, below the levels in the preceding quarter.
