Naira Weakens Further as Banks, Currency Dealers Quote Dollar at Higher Rates
- The Nigerian currency, naira, again suffered a loss against the US dollar in the official foreign exchange market
- Traders at the official forex market quoted the dollar N1,421 per dollar on Wednesday, May 8, 2024, as against the N1,403 quoted the previous day
- Analysts say the current depreciation of the naira is due to the lack of weekly FX sales by CBN to the BDCs
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Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.
The Nigerian currency, the naira, closed weaker at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Wednesday, May 8, 2024.
Data from FMDQ Securities show that the naira crumbled to N1,421 per dollar in the official market, representing a 1.27% decline from the N1,403 per dollar it quoted the previous day.
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Naira depreciates by 2.5% in official market
Forex turnover in the FX market rose by 2.5% to $164 million on Wednesday, May 8, 2024, from the $160.77 million recorded on Tuesday, May 7, 2024.
Traders quoted the dollar at an intra-day high of N1,440 per dollar and a low of N1,335, according to data from NAFEM
In the parallel segment of the foreign exchange market, the naira also buckled by 0.34% to N1,450 per dollar from the N1,445 quoted on Tuesday, May 7, 2024.
Market analysts say the recent crash of the naira is due to the lack of interventions and FX sales to BDC operators by the Central Bank of Nigeria (CBN).
In the last two weeks, the apex bank has not sold forex to BDCs, which is believed to contribute to the local currency's performance.
CBN stops weekly FX sales to BDCs
Forex trader and former banker Justin Oba said the naira is experiencing a crisis again due to the CBN's lack of weekly FX sales to BDCs.
He said the CBN had not supplied the operators with FX in the past two weeks, leading to increased demand in both market segments.
“We know that the weekly forex sales by the CBN to BDCs help prop up the value of the naira in the forex market.
“We have not been supplied with forex in the past two weeks. So, there is a liquidity squeeze from our end,” Oba said.
Dollar supply drops in the FX market
A previous report by Legit.ng shows that foreign exchange supply in the official market dropped by 5.9% in April, leading to the depreciation of the naira.
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.
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.
Naira makes the biggest gain in months in the official window
Legit.ng earlier reported that the official exchange rate is trading below the N1,300 per dollar mark for the first time since January 2024, when the Nigerian currency hit its lowest at N1,600 per dollar.
The naira rallied in the official Nigerian Autonomous Foreign Exchange Market (NAFEM) to trade at N1,278.58 on Tuesday, April 2, 2024, as against the N1,309 traded on Thursday, March 29, 2024, before the Easter holidays.
Data from FMDQ shows that traders quoted the naira at an intraday high of N1,312 per dollar and a low of N1,250 per dollar.
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Source: Legit.ng
