Liquidity in the foreign exchange market failed to improve on Monday, after the Central Bank of Nigeria (CBN) introduced new policy to boost inflows into the country.
The daily foreign exchange market turnover declined by 61.18 percent to $32.58 million on Monday from $83.93 million recorded on Friday at the Investors and Exporters (I&E) forex window, data from the FMDQ show.
Consequently, Nigeria’s currency on Monday weakened further by 0.21 percent to close at N411.88k per dollar compared to N411.00k closed on Friday at the I&E window.
Currency traders who participated in the trading on Monday maintained bids at between N390.00k and N412.00k/$.
The CBN on Saturday announced plans to pay N5 for every one dollar received by all recipients of diaspora remittances through its licensed International Money Transfer Operators (IMTOs).
The move is an incentive introduced by regulator to boost inflows of diaspora remittances into the country.
At the black market, naira also depreciated by 0.41 percent to close at N482 per dollar on Monday from N480 closed on Friday.
The local currency steadied at N480 per dollar at the Bureau De Change (BDC) segment of the foreign exchange market.
Reacting to the CBN’s new policy on diaspora remittances, Charlie Robertson, Global Chief Economist, Renaissance Capital said “Nigeria gives a N5 rebate per $1 if you bring back remittances via official channels .. so you just earn an extra 1% versus the exchange rate. CBN trying to compare this incentive to what has happened in Pakistan and Bangladesh (remittances boomed in 2020)”.
He said the main reason remittances collapsed in Nigeria was because the official exchange rate was so far away from the BDC rate. “For a few weeks/months now you’ve been allowed to use the BDC rate, so remittances were likely to bounce anyway and this incentive might support that but is not the big story,” Robertson said.
The premium between the average interbank and BDC rates widened to 24.1 per cent in November 2020 from 20.5 per cent in October 2020. The premium between the BDC and I&E, also, widened to 22.2 per cent from 19.0 per cent, in the preceding month.
