Nigeria’s currency on Wednesday strengthened by 0.10 percent against the dollar in spite of the decline in liquidity at the Investors and Exporters (I&E) forex window.
The daily foreign exchange market turnover declined by 30.71 percent to $33.55 million on Wednesday compared with $48.42 million recorded on the previous day.
Naira/dollar exchange rate closed at N411.25k after trading on Wednesday, as against N411.67k it closed on Tuesday, according to the data from the FMDQ.
Currency traders who participated in the trading on Wednesday maintained bids at between N395.00k and N422.00k/$, the data indicated.
Exchange rate remained flat at N482 at the Bureau De Change (BDC) segment of the foreign exchange market and N485 at the parallel market.
READ ALSO: Buhari assures on strengthening the economy
Aisha Ahmad, CBN deputy governor, said in her personal statement at the last Monetary Policy Committee (MPC) meeting in March 2021 that relative stability was recorded in the I&E segment of the foreign exchange market.
“This is expected to be maintained given increase in international price of crude oil to US$66.22 per barrel in February 2021 (December 2020; US$51.27) above budget benchmark of US$40 per barrel. Continued implementation of policies aimed at improving foreign exchange receipts (diaspora remittances and non-oil exports) and eliminating spurious and speculative demand will help reduce volatility in the parallel market,” she said.
In his personal statement, Adeola Adenikinju, MPC member, was concerned that the liquidity in the economy is contributing to the pressures in the foreign exchange market as rational economic agents flee to safer currency amid low returns on fixed income assets and rising inflation rate. The planned huge budget deficit for 2021 Fiscal Year will further fuel local inflation rate.
He noted that naira exchange rate depreciated across the various windows, the I&E and BDC. External reserves also declined from US$36.6 billion in December 2020 to US$34.46 billion in February 2021.
According to him, the CBN has spent over US$1.3billion to defend the naira between January and February 2021. It is early in the day to know the extent to which the new policy of CBN to boost remittances will impact on pressures in the foreign exchange market. Though capital imports have picked up in recent months, it is still far below the level it was in January 2020.
