• Wednesday, June 19, 2024
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BusinessDay

Naira ends week strong despite 34.3% drop in liquidity

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The foreign exchange market ended the five trading days with the naira closing strong against the dollar, in spite of a 34.30 percent drop in liquidity at the official market.

Naira printed at N410.80k per dollar on Friday, which was 0.17 percent stronger than the opening rate of N411.50k/$ on Monday, at the official market.

At the beginning of the week, Naira closed unchanged at N411.50k per dollar on Monday and Tuesday, data from the FMDQ indicated.

Naira gained marginally by 0.02 percent as the dollar closed at N411.40 on Wednesday compared with N411.50 quoted on Tuesday at the Investors and Exporters (I&E) forex window, data from the FMDQ indicated.

On Thursday, Naira depreciated by 0.06 percent as the dollar was quoted at N411.67 against the last close of N411.40k on Wednesday.

Read also: Decline and fall of the naira

Daily foreign exchange market turnover closed at $109.03 million on Friday, which was lower than $166.06 million recorded at opening trading day on Monday, data compiled by BusinessDay from the FMDQ indicated.
The market ended the week with Naira weakening by 0.98 percent against the dollar as demand increased at the parallel market, popularly called the black market.

After trading during the week, the naira/dollar exchange rate closed at N515/$ as against the opening rate of N510 per dollar at the black market.

Naira fell sharply to N525 per dollar on July 28, 2021, after the Central Bank of Nigeria (CBN) announced its plan to discontinue the sale of dollars to the Bureau De Change (BDC) operators due to foreign exchange arbitrage.

The local currency started firming up on Thursday, the following day after the Nigerian banks chief executives unanimously agreed to support and meet legitimate demand for dollars by the end-users.

The Naira/dollar exchange rate closed flat at N380.69/USD at the Interbank Foreign Exchange market amid weekly injections of USD210 million by CBN into the forex market, according to a report by Cowry Asset Management Limited.

A breakdown of the disbursement showed that USD100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), USD55 million was allocated to Small and Medium Scale Enterprises and USD55 million was sold for invisibles.

Elsewhere, the Naira/USD exchange rate fell (Naira appreciated) for most of the foreign exchange forward contracts: 1 month, 2 months, 3 months, 6 months and 12 months exchange rates fell by 0.03 percent, 0.13 percent, 0.11 percent, 0.10 percent and 0.04 percent to close at N412.22/USD, N413.47/USD, N415.27/USD, N421.65/USD and N434.91/USD respectively. However, the spot rate remained flat at N379.00/USD.

“In the new week, we expect Naira to stabilize against the greenback at most FX segments amid increased accretion to the external reserves and expected allocations of USD to the deposit money banks who have been mandated to service USD demands of international travellers, analysts at Cowry Asset Management, said.

During the week, precisely, the CBN and the bankers’ committee agreed to digitize dollar sales for legitimate needs through creating an App. Such legitimate needs include Business Travel Allowance (BTA), Personal Travel Allowance (PTA), school fees and medicals.

Segun Agbaje, Group chief executive officer, Guaranty Trust Holding Company (GTCO) Plc, who spoke on the CBN’s latest foreign exchange policy said, the new FX policy with regards to invisibles – BTA, PTA, school fees and health is working very well.

“The banks are taking it upon ourselves along with the regulator to make sure that this works. Most of the things you are doing today involve going into the branches to do most things. We are going to try also to digitize this whole thing the way the world is going, he said.

He said an App is being created by NIBSS where customers will be able to buy online. “You have to bring your ticket so we are sharing this information on the portal. This is very important information because if we find that people are trying to defraud the system, we will track it on the portal. The banks will report the individuals to the CBN.

“The likely punishment is that your account will be PMDied. PMD of your account means that you won’t be able to do anything in the banking system. This is for people who have genuine needs so fraudulent transactions or fraudulent individuals will be reported to the CBN and the portal will help us this,” Agbaje said.