Naira, Nigeria’s legal tender on Wednesday fell to N535 per dollar at the unofficial market and 0.20 percent at the official market despite the recent accretion in external reserves.
Nigeria’s external reserves has in the last one month increased by 2.77 percent to $34.49 billion as of September 6, 2021 compared to $33.56 billion in August 6, 2021 according to the data on the website of the Central Bank of Nigeria (CBN).
With the current rate at the unofficial market, the local currency has weakened by 6.15 percent in less than two months, from N504/$ in July 26, 2021 before the halt of dollar sales to the Bureau De Change (BDC) operators.
Traders told BusinessDay on Wednesday that the demand for dollars was coming mostly from importers who could not access the greenback from the banks due to documentation issues.
The CBN on July 27, 2021 after the Monetary Policy Committee (MPC) meeting to discontinued the sale of foreign exchange to the BDCs due to forex infractions.
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The CBN also directed banks to sell dollars for legitimate needs of the end users. Such legitimate needs include Personal Travel Allowance (PTA), Business Travel Allowance (BTA), school fees and medicals.
At the Investors and Exporters (I&E) forex window, naira depreciated by 0.20 percent as the dollar was quoted at N411.50k on Wednesday as against N410.67k quoted on the previous day, data from the FMDQ showed.
Currency traders who participated at the trading session on Wednesday maintained bids at between N400.00k and N412.95k per dollar.
The foreign exchange market daily turnover increased significantly by 130.57 percent to $295.39 million on Wednesday from $128.11 million recorded on Tuesday.
However, exchange rate disparity between the official and alternative markets, which is about 23 percent remains a concern.
This arbitrage is driven by supply shortage with attendant speculation and affects businesses that pay higher premium to buy dollars.
“The spreads between the official markets and the unofficial markets of roughly 20 percent will continue to drive arbitrage bets and speculations on the naira,” said Jimi Ogbobine, head of Consulting at Agusto Consulting, a pan-African credit rating agency.
Nigerian banks regulator conducts its monetary policy and defends the value of the Naira from a portion of the foreign reserves. The CBN supplied USD3bn to the BDCs between September 2020 and March 2021, accounting for 29 percent of its total FX supply to the market.
At the money market, the Nigerian Treasury bills secondary market closed on a flat note on Wednesday, with the average yield across the curve remaining unchanged at 4.70 percent, a report from the FSDH Research stated.
Average yields across short-term, medium-term, and long-term maturities closed flat at 3.16 percent, 4.31 percent and 6.11 percent, respectively. At the Primary Market Auction held on Wednesday, the CBN offered NT-Bills worth N138.2 billion across 91-day, 182-day, and 364-day tenors.
The Overnight (O/N) rate increased by 2.08 percent to close at 9.33 percent on Wednesday as against the last close of 7.25 percent on Tuesday, and the Open Buy Back (OBB) rate increased by 1.83 percent to close at 8.83 percent compared to 7.00 percent on the previous day.
Money market rates are likely to remain stable at current levels, barring any mop-up activity by the CBN, said analysts at the FSDH.
