Nigeria’s currency reversed Thursday’s gain as it weakened by N1.50k, exchanging with the dollar at an average rate of N465 on Friday, from N463.50k traded on the previous day on the black market.
The foreign exchange market has witnessed dollar shortages since early this year as a result of sharp drop in prices of oil, which accounts for about 90 percent of the country’s foreign exchange earnings and low inflows from remittances due to the Covid-19 pandemic.
The price of Brent crude, which fell to below $20 per barrel in March 2020 is gradually recovering as it stood at $43.13 per barrel as at September 18, 2020.
Investigations show that while currency traders across Lagos’ parallel markets buy dollars from individuals at N460, they sell at N465 to the end users.
Naira fell by N6 as the dollar was sold at N466 on Friday from N460 on Thursday at the Bureau De Change (BDC) segment of the foreign exchange market.
The Central Bank of Nigeria (CBN) is expected to sell some dollars to BDCs on Monday as they fund their accounts today (Friday).
The CBN had in an August 27, 2020 circular said the purchase of foreign exchange by BDCs would be on Mondays and Wednesdays in the first instance. The BDCs are to ensure that their accounts with the banks are duly funded with the equivalent naira proceeds on Fridays and Tuesdays accordingly.
The CBN resumed dollar sales to BDCs on Monday September 7, 2020 and has so far supplied over $200 million to the BDCs. The apex bank sells $10,000 twice weekly to this segment of the foreign exchange market.
Akintunde Olusegun, financial market analyst at Polaris Bank Limited, said, “Inasmuch as Nigeria still depends on importation for a larger part of our raw material and final goods consumption, naira will keep chasing scarce dollars and therefore the scarcity will persist despite CBN’s effort.”
In addition to the importation of goods and services induced demand for the greenback, he said there’s a new store of value induced demand for dollar, where some of the nation’s citizens purchase USD to hedge against growing inflation.
At the Investors and Exporters (I&E) forex window, naira signalled depreciation by N0.32k as the market opened with an indicative rate of N386.37k on Friday from N386.05k opened with on Thursday, data from the FMDQ said.
The daily forex turnover declined by 69.12 percent to $87.78 million on Thursday from $284.23 million recorded on Wednesday at the I&E window.
