Dollar Supply in Official Market Falls to $3.47 Billion as Naira Loses 5.9% in One Month

• The Nigerian foreign exchange market has seen a decline in forex turnover in one month at $3.47 billion
• The development led to the naira depreciating by 5.9 per cent in the official market in one month
• Analysts believe the decline is due to lack of CBN’s interventions in the foreign exchange market in the last two weeks

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

Forex turnover in the Nigerian Autonomous Foreign Exchange Market (NAFEM) dropped 37.4% month-on-month to $3.47 billion in April 2024 from the $5.54 billion recorded in March 2024.

An analysis of weekly transactions in the official market by FMDQ Exchange shows that turnover stood at $836.66 million in the first week of April but dropped by 49.5% to $420.33 million in the second week due to the three days of holidays observed over the week.

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Mix fortunes trail naira's performance in April

However, supply increased by 133.5% to $981.77 million in the third week and dropped by 12.3% to $860.54 million in the fourth week.

Vanguard reports that market turnover stood at $373,19 million in the last trading activities in April 2024, leading to the depreciation of the naira in the official and parallel markets during the review period.

The Nigerian currency gained N81.57 to close at N1,390 per dollar in NAFEM on April 30, 2024, from the N1,309.39 traded on March 28, 2024.

The naira also shed N20 in the parallel market during the review period.

Data from black market traders shows that the exchange rate for the market increased to N1,310 per dollar on April 30 from N1,290 per dollar on March 28, 224.

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Gaps between official and parallel markets widen

The gap between the parallel and official markets increased to N80.96 per dollar on April 30, 2024, from N19.36 on March 28, 2024.

Analysts believe the naira is being battered by insufficient supply as the Central Bank of Nigeria (CBN) has not intervened in the forex market in the last two weeks.

The CBN has been selling dollars to Bureau de Change (BDC) operators to ease supply and reduce the pressure on the naira.

The development comes as reports say that the apex bank had been defending the naira from the external reserves, leading to a loss of about $2 billion.

Analyst defends naira's fall as CBN intervention drops

The apex bank refuted the claims, saying it does not intervene in the FX market with forex from the reserves.

Michael Isigugo, an FX analyst and trader, disclosed that the naira’s value began depreciating again due to increased dollar demand during the Easter holidays.

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“We realize that after the Easter holidays, demands for dollars increased by almost 30% as buyers sought forex for various reasons.

"Some people were returning to school; hence, they needed FX for school fees, while others went for medicals abroad. Remember also that there was a decline in diaspora remittances during the period,” Isiguzo said.

Naira loses 5.9% against the dollar in one month 

BusinessDay reports that the naira depreciated 5.9% against the dollar in April, following increased demand and low supply.

The naira’s depreciation came amid economic uncertainties and global market fluctuations. Analysts blamed the fall on declining FX reserves, inflationary pressures, and subdued economic growth.

Currency speculators win as the naira falls

Legit.ng previously reported that the Nigerian naira traded at its lowest in the official Nigerian Autonomous Foreign Exchange Market (NAFEM).

Some traders sold the dollar at N1,410 per dollar in various areas across Nigeria on Friday, May 3, 2024, as demand increased amid dollar scarcity.

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Some traders said the demand came from individuals who needed the dollars for businesses, personal travel, or imports.

Source: Legit.ng