The Naira appreciated by 3.74 percent against the dollar at the Investors’ and Exporters’ (I&E) forex window, despite a 66.33 percent drop in liquidity, on Monday.
The daily foreign exchange (FX) market turnover, which reflects the volume of dollars transacted in the market declined by 66.33 percent to $88.68 million on Monday from $263.45 million recorded on Friday June 30, 2023.
The dollar flows came from the willing buyers and willing sellers that participated in the FX market auction on Monday.
Consequently, the dollar was quoted at the rate of N741.50 on Monday compared to N769.25 quoted on Friday at the I&E window, data from the FMDQ showed.
On June 14, 2023, the CBN abolished segments of the official FX market to the I&E Window, where the “willing buyer and willing seller” was re-introduced. Based on this adjustment, the official rate rose from N463.38/$ to N741.50, the current rate.
At the parallel market on Tuesday, naira weakened by 0.51 percent as the dollar was trading at N775 as against N771 traded on Monday.
Traders confirmed to BusinessDay that demand for dollars increased slightly, from individuals who need the greenback for travel, school fees, medical and tourism.
Before the major FX reforms implemented on June 14, the CBN only allowed a slow depreciation of the official exchange rate, which was insufficient to bring the supply and demand of foreign currency into balance, placing increasing pressure on the exchange rate in the parallel market, according to the World Bank report.
The report noted that the official rate depreciated by 11 percent from January 2022 through May 2023, while the parallel market rate depreciated by 30 percent, with the parallel market rate premium widening from 37 percent in January 2022 to 63 percent in May 2023. During this period, the CBN, the largest single supplier of FX to the Nigerian economy, continued to suppress FX demand.