The foreign exchange market (FX), specifically the parallel market segment, was on Saturday thrown into confusion, following the suspension of Godwin Emefiele, governor of the Central Bank of Nigeria (CBN) by President Bola Ahmed Tinubu.
Tinubu on Friday suspended Emefiele, following the ongoing investigation of his office and the planned reforms in the financial sector of the economy.
Traders at the parallel market, popularly called black market, said the market could not establish any rate after the suspension of the governor regulating the banking and finance sector of the economy.
“There is no rate today. People are not buying because they said the rate might go down as the CBN governor has been suspended. I was even begging one of my customers to buy at N750, he refused, “one trader told BusinessDay on Saturday.
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At the close of business on Friday naira closed at the rate of N760 per dollar, stronger than N765 traded during the intraday trading of that same day.
At the Investors and Exporters (I&E) on Friday, Naira fell to N472.50, against the dollar, lowest ever recorded since the market was created in 2017.
This represents 0.63 percent (N3) when compared to N469.50/$1 quoted on Thursday at the official foreign exchange market.
Most currency traders who participated at the foreign exchange auction on Friday maintained bids between N460/$1, lower and N477.00/$1, higher bid.
Tinubu had in his inaugural speech on May 29, 2023 signalled plans for a single exchange rate. He said monetary policy needs thorough house cleaning and that the Central Bank must work towards a unified exchange rate.
This will direct funds away from arbitrage into meaningful investment in the plant, equipment and jobs that power the real economy.
Brent crude oil price extended its prior week’s decline, down 0.3 percent week-on-week (w/w) to settle at $75.89/bbl. On the domestic front, Nigeria’s foreign reserves declined mildly by 60bps w/w to $34.9ban as of June 7, 2023, a report by Afrinvest Securities Limited noted.
“We expect the naira to trade relatively around the N470 band across the official market segment barring any market distortion and current market information driving demand. Also, as the CBN continues its weekly FX market intervention to defend the value of the naira at the retail FX auction and secondary windows, we anticipate movement in rates in tandem with market realities,” analysts at Cowry Asset Management Limited said.
