Naira gains at official market on increased dollar supply

… steadies at an average rate of N922.5/$

Naira gained 4.79 percent of its value against the dollar on Wednesday at the Investors and Exporters (I&E) forex window, Nigeria’s official foreign exchange (FX), following increased liquidity.

At the end of trading on Wednesday, the dollar was quoted at N738.18/$1 as against N775.34/$1 quoted on Tuesday at the I&E window, data from the FMDQ indicated.

Willing buyers and willing sellers supplied dollars in the market as the volume of transactions jumped by 138.57 percent to $170.15 million on Wednesday from $71.32 million recorded on Tuesday.

FX dealers were bidding as high as N800/$1, which was marginally lower than N799.9/$1 bid on Tuesday, and N701/$1 was the lowest bid recorded on Wednesday and Tuesday.

At the parallel market, also known as the black market on Thursday, naira steadies between N920 and N925 at the various street trading areas across the country.

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Naira experienced significant pressures in the first half (H1) of 2023, primarily triggered by the collapse of all official foreign exchange windows into the import & export window, according to a report by United Capital Research.

The report said the merging of the official FX windows into the I&E window had a pronounced impact on the Naira’s exchange rate, causing a rapid depreciation in its value.

It stated that the decision was taken as part of the government’s efforts to streamline and manage the country’s foreign exchange policies and operations.

According to the report, in the first half of 2023, Naira experienced a significant decline in its value. This accelerated devaluation was primarily triggered by the collapse of all official FX windows into the I&E window.

The directive to merge the FX windows came from President Ahmed Bola Tinubu and was implemented by the Central Bank of Nigeria (CBN). The merging of the official FX windows into the I&E window had a pronounced impact on the Naira’s exchange rate, causing a rapid depreciation in its value.

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The decision was taken as part of the government’s efforts to streamline and manage the country’s foreign exchange policies and operations.

“On June 30th, 2023, the Nigerian Naira experienced a significant depreciation, falling to N760/$ from an unspecified value (Nx/$) on January 2nd, 2023. This sharp decline in the Naira’s value triggered various market reactions, including the relative stability of the external reserve.

“To address the situation, the CBN implemented a series of policy measures. These included reintroducing the “willing buyer, willing seller” model at the Import and export (I&E) window, pegging the operational rate of all government transactions at the weighted average rate of the preceding days’ transactions, and lifting trading limits on oversold foreign exchange positions while setting it to nil on overbought positions.

“Additionally, the CBN reintroduced the two-way quotes system with a bid-ask spread of N1:00, which aimed to bring more transparency and flexibility to the FX market. These measures were taken to address the rapid depreciation of the Naira and stabilize the FX market.

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“However, their effectiveness and impact on the overall economy would depend on various economic factors and market dynamics.

As of June 30th, 2023, both the RT200 rebate Scheme and the Naira4Dollar remittance scheme have been discontinued,” the report stated.