“No More N800/$”: Despite CBN’s New Instructions to BDCs, Naira Crashes in Official, Black FX Markets
- The naira tumbled once again against the United States dollar across the foreign exchange markets
- This came a few days after the CBN released a new rule targeting Bureau De Change operators
- The CBN is having a big headache in finding a solution to the exchange rate gap between the official and black FX markets
PAY ATTENTION: Click “See First” under the “Following” tab to see Legit.ng News on your Facebook News Feed!
Nigeria's naira continued its poor performance against the US dollar in the official and unofficial foreign exchange (FX) market windows on Wednesday, August 23, 2023.
This is despite the efforts by the Central Bank of Nigeria (CBN) to checkmate activities at the various forex markets.
Source: Getty Images
CBN's efforts at official and black market
Legit.ng had earlier reported that CBN instructed Bureau De Change in a circular dated August 17, 2023, titled, Operational mechanism for Bureau de Change operations in Nigeria not to sell or buy dollars above or below a specific limit.
PAY ATTENTION: Сheck out news that is picked exactly for YOU ➡️ find the “Recommended for you” block on the home page and enjoy!
The statement read in parts:
“The spread on buying and selling by BDC operators shall be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian exchange market window weighted average rate of the previous day.
Also, CBN recently announced a Foreign Exchange (FX) Price Verification System (PVS) for importers.
Naira to dollar exchange rate at official, black markets
The impact of CBN's efforts did not come into play for the naira at the Investors and Exporters (I&E), black market, and the Peer-to-Peer (P2P) windows of the foreign exchange (FX) market.
FMDQ securities reports that the naira closed against the US dollar on Wednesday at N773.42/$1 in the I&E window.
This represents N2.70 or 0.35% drop in value compared to the previous day’s rate of N770.72/$1.
While in the Peer-to-Peer (P2P) Naira value depreciated by N6 against the US dollar on Wednesday to settle at N911/$1 compared with Tuesday's rate of N905/$1
In the parallel market, the Naira went down by N6 against the Dollar to sell at N900/$1, in contrast to the previous day’s exchange rate of N890/$1.
At the close of trade on Wednesday, the exchange rate gap between the black and official markets stood at N126.5.
The naira recently recorded a gain against the dollar and exchanged at the N800/$ band in the black market, but it seems that it was just an effect of the buzz from NNPC Limited's $3 billion loan.
Expert speaks
Reacting Dr Omobola Adu, an Investment Research Analyst with Afrinvest Research and Consulting, told Legit.ng that the Nigerian currency will continue to struggle until at least December 2023.
According to him, for the naira to strengthen, there is a need to enhance dollar liquidity in the foreign exchange market.
He said:
"Until there is enough supply to meet FX demand, the ability to stabilise the exchange rate will be difficult and might force the CBN to use its limited reserves.
"Foreign investors are still observing the market before bringing in their money.
"Remember, the CBN has a backlog of payments to foreign companies looking to repatriate their revenues. The dollars will start flowing in if there is a guarantee that investors can easily repatriate their funds without delay due to liquidity issues.
"It will take until the end of the year and early next year before the naira rate stabilises and that is being optimistic."
CBN announces dollar to naira price verification portal
Meanwhile, in another report, it was revealed that the CBN had introduced a new portal that would put an end to malpractices in the foreign exchange market.
The portal is set to go live by the end of August 2023, and it is expected to be a game-changer if done correctly.
Source: Legit.ng
