Nigeria’s currency fell sharply by N5.00k as the dollar was trading at N465 on Thursday from N460 on Wednesday due to increased demand.
The demand was coming from importers who needed the dollars to meet their obligations as the official market was faced with low liquidity.
At the retail Bureau segment Naira also depreciated by N3.00k after the dollar was sold at N465 on Thursday as against N462 sold on the previous day.
Ayodeji Ebo, managing director, Afrinvest Securities Limited said the major challenge is still the illiquidity of the greenback. Activity level is significantly low in all the official segments of the FX market, hence demand has been shifted to the unofficial market-parallel market.
Most businesses source for dollars via the parallel market to meet their dollar obligations. “We won’t see much appreciation at that segment if liquidity level does not improve at the various official segments especially the Investors & Exporters window,” Ebo said.
The foreign exchange daily turnover declined significantly by 88.43 percent to $11.96 million on Wednesday from $103.37 million recorded on Tuesday at the Investors and Exporters (I&E) forex window.
The Central Bank of Nigeria (CBN) on Tuesday adjusted the exchange rate at the official window by 5.54 percent to N381 per dollar from N361/$, a move seen as helping to curb roundtripping.
“There is still demand pressure in the foreign exchange markets,” said, Ayodele Akinwunmi, relationship manager corporate banking at FSDH Merchant Bank Limited.
However, the foreign exchange market opened with an indicative rate of N386.96k on Thursday, signaling N0.36k appreciation when compared with N387.32k opened with on Wednesday at the I&E window, data from FMDQ revealed.
A report by FSDH research showed that FX Inflows dipped further to US$248 million in June 2020 Q1’20=US$11.92 billion VS Q2’20=US$1.2 billion). In early July, the CBN adjusted exchange rate in the Secondary Market Intervention Sales (SMIS) – a window where importers access foreign currencies – from N360/$1 to N380/$1.
Following the lockdown and restriction of economic activities in April and May, total inflows to the I&E Window dropped from US$3.7 billion in March to US$459.2 million in April, US$492 million in May 2020, the report stated.
According to the report, the CBN intervention increased from US$390 million in January 2020 to US$2.48 billion and US$2.89 billion in February and March respectively.
The attendant effect of COVID-19 on oil price constrained the CBN’s capacity to intervene further as dollar inflow dwindled in April.