FX market opens with naira gaining 0.61% on dollar inflows

The foreign exchange market opened for trading on Monday with Nigeria’s currency strengthening by 0.61 percent on the black market following inflows from the International Money Transfer Operators (IMTOs).

Dollar is currently trading at N482, which is stronger than N485 it has been trading since April 1, 2021 across Lagos streets where the black market operators are transacting business.

One of the traders told BusinessDay that there has been improvement in dollar supply as individuals receive dollars from IMTOs and go to black market to get the naira equivalent.

Another reason for the naira appreciation is low demand for the greenback.

On November 30, the CBN said beneficiaries of Diaspora remittances through IMTOs would thenceforth receive such inflows in foreign currency (US dollars) through the designated bank of their choice.

Remittances flow into the country has improved from a weekly average of about US$5 million before the policy directive by the CBN to over US$30 million per week, Godwin Emefiele, governor of the CBN, said in February.

Exchange rate is trading flat at N482 at the Bureau De Change (BDC) segment of the market. Over 5,000 BDC operators are expected to fund their accounts on Monday in anticipation for dollar disbursement by the Central Bank of Nigeria (CBN).

However, during to intra-day trading at the official Investors and Exporters (I&E) forex window, naira weakened by 0.27 percent to N410.88 per dollar on Monday from N409.79/$ on Friday, as a result of increased demand for dollar.

Read Also: Naira closes strong on increased dollar supply

The foreign exchange market closed the week with naira strengthening by 0.36 percent, stronger than 0.04 percent closed the previous week at the Investors and Exporters (I&E) forex window.

This followed improved liquidity as the market turnover rose by 35.31 percent Week-on-Week to $55.21 million at the end of the trading week on Friday compared to $40.80 million recorded at the opening of the trading week, data compiled by BusinessDay from the FMDQ indicated.

The Central Bank of Nigeria (CBN) intervened through its periodic supply of US Dollars in the FX market, offering a total of $100.00m via the secondary market intervention sales (SMIS) wholesale window, according to a report by Afrinvest Securities Limited.

Naira/dollar exchange rate was quoted at N409 at the end of the trading week from the opening rate of N410.50k on Tuesday, data from FMDQ revealed.

The local currency closed flat at N485 on the black market while at the Bureau De Change (BDC) segment of the foreign exchange market, Naira gained N3 as the dollar closed at at N482 at the end of the week, as against the opening rate N485.

Oil prices declined 2.8% w/w to close at $63.02/bbl. from the previous week. On the domestic front, external reserves inched higher by 0.5% w/w to $35.0bn as at Wednesday.

At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts increased by 0.5% ($26.0m) to $5.2bn. The MAR 22 instrument (Contract price: N435.58) saw a significant gain as there was an increase of 19.6% ($40.0m) to $244.5m in total value.

On the other hand, the APR 2022 instrument (Contract Price: N437.88) recorded sell-offs as the total value decreased by $58.0m to $22.5m.

“In the coming week, we anticipate rates to remain in the same band across the segments of the FX market,” analysts at Afrinvest said.

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