Exchange rate flat as market closes 4-day trading week

The foreign exchange market closed a four-day trading week with Nigeria’s currency trading flat against the dollar at the parallel market and Bureau De Change (BDC) segment, while the official rate recorded marginal depreciation.
The market operates a five-day trading week but due to the holiday declared by the Federal Government to mark the Easter celebration, the market observed a four-day trading, which ended on Thursday.

Parallel market
After trading for the week, Naira closed flat at N485 per dollar at the black market and BDC segment of the market.
During the week, Naira weakened by N1.00k as the dollar traded at N486 on Tuesday compared to N485 traded previously on the black market. It steadied at N486 per dollar on Wednesday before regaining strength to N485 to the dollar on Thursday.
The Naira appreciation was attributed to moderation in demand for the greenback by the end users. Some of the traders who spoke with BusinessDay said as banks closed for the holiday, there was low activities and that some of them have travelled for the holiday.
Godwin Emefiele, governor of the CBN had said that the black market is a shallow that account only about five percent of the foreign exchange market which is patronised by people who go there for cash to offer bribes and corruption. Parallel market is the place where people who don’t want to provide documents go, he said.

Investors and Exporters window
At the Investors and Exporters (I&E) forex window, Naira weakened marginally by 0.04 percent Week-on-Week to close at N409.30k per dollar on Thursday as against the opening rate of N409.13k/$.

On Monday Naira gained 0.21 percent in its value against the dollar, which closed at N409.13k compared to N410.00k closed on Friday last week at the I&E window.
Naira on Tuesday strengthened marginally against the dollar by 0.03 percent. After trading on that Tuesday, naira closed at N409.00k per dollar compared to N409.13k/$ closed on Monday at the I&E window.
On Wednesday Naira maintained gain at the I&E forex window, as dollar supply declined.

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After trading on Wednesday the market closed with Naira firming against dollar by 0.08 percent to N408.67k compared to N409.00k closed on Tuesday, data from the FMDQ revealed.

FX turnover
The foreign exchange market turnover increased by 15.27 percent Week-on-Week to close the week at$35.55 million on Thursday from $30.84 million recorded at the first day of the week, data compiled by BusinessDay from the FMDQ indicated.
On Monday the daily foreign exchange market turnover declined by 57.42 percent to $30.84 million from $72.43 million recorded on Friday last week.
The daily foreign exchange market turnover rose by 55.41 percent to $47.93 million on Tuesday from $30.84 million recorded on Monday.

On Wednesday the daily foreign exchange market turnover declined by 26.20. percent to $35.37 million from $47.93 million recorded on Tuesday.

Analysts report
The foreign exchange market continues to witness supply shortage of foreign currency to meet its demand. Consequently, the gap between the various markets keeps expanding, FSDH research said in a report.
As at March 16, 2021, the Naira on the I&E window closed at N409.67/US$, representing a year to date appreciation of 0.14 percent. It depreciated by 5.43 percent in the parallel market to N485/US$. Meanwhile, on the CBN Official, the Naira remained stable at N379/US$.
“Foreign exchange pressure will continue into the second quarter owing to limited inflows from both crude and non-oil sources, rising imports and a backlog of foreign currency demand,” the analysts said.

Despite rising crude oil prices, Nigeria’s external reserves have lost 5.7% of its value from January 25 to March 17, 2021, the report revealed.
Challenged oil inflows due to OPEC cuts, weaker foreign investment inflows, high demand for foreign currency to finance imports and other needs and possible clearance of FX backlogs are factors that continue to weaken External Reserves.

At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts fell 20.6% ($1.3bn) to $5.1bn. The MAR 2022 instrument (contract price: N435.58) sustained its strong buying interest with an additional subscription of $193.9m, which took total value to $204.5m. Also, the APRIL 2022 instrument (contract price: N437.88) saw a significant gain, as total value increased $78.0m to $80.5m.
“In the coming week, we anticipate rates to remain in the same band across the segments of the FX market,” analysts at Afrinvest Securities Limited said.