• Tuesday, May 21, 2024
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BusinessDay

Exchange rate stable across markets amid cash crunch

ACTN tasks FG on convergence on exchange rate

Naira dollar exchange (FX) rate has stabilised across official and parallel foreign exchange markets amid cash crunch.

The local currency has hovered around N461 to N462 per dollar since the beginning of the year at the Investors and Exporters (I&E) forex window, Nigeria’s official FX market.

At the parallel market, also known as black market, naira has hovered around N750 to N765 per dollar.

On a day to day trading basis, naira depreciated by 0.04 percent as the dollar was quoted at N461.50 on Monday as against the last close of N461.33 on Friday.

Most currency dealers who participated at the foreign exchange market auction on Monday maintained bids between N460.00 (low) and N462.43 (high) per dollar.

At the black market, the dollar has traded at N745 since last week.

At the open market last week, the local currency edged the United States dollar as it appreciated by N5 or 0.7 percent week on week to close at N746/USD from N751/USD in the previous week even as dollar demand took a calm in the face of scarcity crunch which continues to bite harder, a report by Cowry Asset Management Limited said.

The report also noted that at the investors’ and exporters’ FX window, the Naira appreciated slightly by N0.50 or 0.11 percent week on week to close at N461.33/USD from N461.83/USD despite the growing FX demand pressure on the naira.

Read also: FX market auction records highest ever bid as naira firms

“We expect the naira to trade in a relatively calm band across various market segments this week, barring any market distortion in the face of the Naira scarcity and as the apex bank continues its weekly FX market intervention to defend the value of the naira,” analysts at Cowry Asset Asset said.

The value of Nigeria’s currency, naira, is projected to strengthen to N680 per dollar this year, according to Bismarck Rewane, managing director/chief executive officer of Financial Derivatives Company Limited.

The gap between the naira/dollar exchange rate at the official and parallel market of the foreign exchange has continued to widen due to demand pressure.

Nigeria’s external reserves, which give the Central Bank of Nigeria (CBN) the firepower to defend the naira, have declined to $35.74 billion as of March 24, 2023 but picked up to $36.67 billion as of Tuesday.

FX reserves plummeted to $36.96 billion in December 2022 from its all-time high of $62.08 billion in 2008, Rewane noted.

Godwin Emefiele, governor of the Central Bank, had in November 2022 said the official foreign exchange receipt from crude oil sales into Nigeria’s official reserves has dried up steadily from above US$3.0 billion monthly in 2014 to an absolute zero dollar.

He noted that the Nigerian foreign exchange market was in the middle of a serious crunch which was straining the reserves and stifling the value of the naira.