The Naira saw a modest increase against the United States dollar at the Nigerian Autonomous Foreign Exchange Market on Thursday, finishing at N1,498.25/$, an improvement from N1,503.38/$ noted the day before.
This advancement occurred as the Central Bank of Nigeria (CBN) introduced a series of circulars on Thursday aimed at curtailing the activities of foreign exchange racketeers and financial operators engaging in deceitful practices. These circulars, all dated February 14, 2024, address various issues.
In its first circular, the CBN prohibited banks from disbursing Personal Travel Allowance (PTA) in cash to customers. A second circular instructed International Oil Companies to stagger the repatriation of all their revenues to their parent companies. Additionally, in a third circular, the CBN revised its guidelines to prevent the under-invoicing of exports and over-invoicing of imports.
Despite these measures, the Naira closed near 1,500/dollar at the official market on Thursday, even as there was a decrease in dollar supply by commercial banks at the spot FX market.
Data from the FMDQ exchange securities highlighted an increase in supply to $381.92m on Tuesday from $89.61m on Monday, which then fell to $117.87m on Wednesday.
The Naira began the week at an unprecedented low of N1,534/$, hinting at significant impacts on goods and services pricing.
However, the Naira marginally appreciated to N1,499/$ on Tuesday but dipped again to N1,503.38/$ by Wednesday’s close, before recovering slightly to N1,498/$ at Thursday’s trading close.
In the parallel market, the Naira depreciated to N1,600/$, marking about a 6.45 percent increase from N1,503/$ at the week’s start.
Despite the CBN’s efforts to regulate the market, Nigerians continue to patronize black market vendors.
The naira’s weakening has surpassed financial analysts’ expectations. Johnson Chukwu, the Group Managing Director of Cowry Asset Management Limited, had forecasted that the naira might fall to N1,500/$ in 2024.
A Bureau De Change operator in Abuja reported the dollar rate closed at N1,600/$ on Thursday.
In Lagos, a BDC operator, Faruq Lawal, indicated the Naira closed at N1,610 to a dollar, underscoring the current uncertainty regarding the Naira’s value due to high demand.
Comercio Partners reported that the Naira depreciated by about 66 percent in 2023, with the official exchange rate plummeting from 462 Naira per US dollar to 1041 Naira per US dollar from January to December 2023. The parallel market saw the rate change from N755 to N1,207 within the same period, illustrating a significant gap between official and parallel rates.
The CBN’s recent interventions include revising the allowable limit of price deviation for exports and imports to -15 percent and +15 percent of global average prices, respectively, to mitigate the impact of global inflation and other challenges.
Furthermore, the CBN has barred cash payments of PTA/BTA by banks, mandating electronic transactions only.
Additionally, the CBN directed International Oil Companies to fund their offshore accounts in two phases, addressing the issue of cash pooling affecting domestic forex market liquidity.
These measures by the CBN aim to enhance transparency, stability in the foreign exchange market, and curb malpractices, ensuring a more regulated and equitable financial environment.
