Forex turnover in Nigeria experienced a significant decline, plummeting by 56.17% to $203 million, even as the Nigerian naira marginally strengthened against the dollar in the official market on February 7th, 2024. However, the parallel market witnessed a deterioration in exchange rates during the same period, highlighting challenges despite the Central Bank of Nigeria’s (CBN) efforts to bolster forex supply.
According to data from the Nigerian Autonomous Foreign Exchange Market (NAFEM), the local currency, despite a slight gain, depreciated by 1.12% to close at N1418 to a dollar. This represents a notable loss compared to the previous day’s closing rate of N1433.89. Notably, the day saw an intraday high of N1,510/$1 and an intraday low of N896.28/$1, signaling a substantial spread of N613.72/$1 and marking the 7th consecutive day of an intraday high above N1,500/$1.
Despite efforts, including policy measures from the CBN, forex turnover saw a sharp decline, with the day’s trading closing at $203.93 million, a staggering decrease of 56.17% from the previous day’s figures. However, the parallel market reflected a slight naira depreciation, with rates quoted at N1465/$1, down by 1.02% from the previous day’s close, while peer-to-peer traders quoted around N1482.50/$1.
CBN Governor Yemi Cardoso recently reported positive outcomes from the bank’s reforms, highlighting increased dollar liquidity exceeding $800 million in market transactions. These efforts come amid the naira’s significant depreciation against the dollar in recent weeks, spurred by measures to align official market rates with the parallel market.
Addressing forex scarcity, the CBN has undertaken various reforms, including clearing a backlog of forex obligations totaling $2.3 billion, leaving just $2.2 billion outstanding. Additionally, plans are underway to establish a unified foreign currency gateway bank to streamline correspondent banking activities and incentivize individuals holding foreign currencies outside the formal banking system.
Despite these efforts, challenges persist, with market dynamics reflecting a delicate balance between official and parallel market rates. The effectiveness of ongoing CBN initiatives in stabilizing the forex market and curbing naira depreciation remains a subject of keen interest among stakeholders and market participants.
Credit: Nairametrics
