Naira gains despite five-month low dollar supply

The naira on Monday recorded gains across foreign exchange (FX) markets, despite a decline in dollar supply to lowest in five months.

After trading on Monday, the local currency gained 0.61 percent as the dollar was quoted at N1,607.15, compared to N1,617.08 quoted on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), data from the FMDQ indicated.

Dollar supplied by willing sellers and willing buyers, which reflects the volume of transactions on NAFEM, declined five-month low to $77.09 million on Monday, lowest since February 19, 2024 when it printed at $66.43 million. This represents 41.39 percent drop compared to $131.55 million recorded on Friday.

The intraday high closed at N1,620.50 on Monday from N1,635 closed on Friday, while the intraday low printed at N1,570 on Monday as against N1,550 on Friday.

At the parallel market, popularly called the black market, the naira gained N5 as the dollar traded at N1,600 from N1,605 traded on Friday.

The Central Bank of Nigeria (CBN) planned to sell dollars in a retail auction on Wednesday. The action is aimed at easing the mounting pressure on the local currency and stabilising the foreign exchange market.

This implies that apex bank will reintroduce the retail Dutch auction system on Wednesday. The Retail Dutch Auction System (RDAS) is a direct sale of forex by the CBN through banks to end users of the forex.

It is based solely on actual FX demand of forex by end users. As such, the authorised dealers will only bid for forex based on the number of actual requests it has received from its end users. For example, if an authorised dealer has received only $1 million of confirmed dollar requests from its end users, it can only bid for that $ 1million from the CBN auction.

According to a statement published by the CBN, in February 2015, the Retail Dutch Auction System and the Wholesale Dutch Auction System (RDAS/ WDAS) window under which foreign exchange was previously available at a subsidised rate were effectively discontinued.