Foreign exchange turnover rose to a whopping $227 million on Wednesday, the highest daily turnover in over two months. Nigeria’s exchange rate at the NAFEX window depreciated marginally closing at N386 during intraday trading on Wednesday, August 19, 2020. In contrast, the exchange rate at the parallel market gained on Wednesday as it closed at N477/$1.
Forex Turnover: Forex turnover at the Investor and Exporters (I&E) window recorded a massive gain on Wednesday, August 19, 2020, as it increased by a record 1132.6% a day on day.
- According to the data from FMDQ, forex turnover increased from $18.44 million on Tuesday, August 18, 2020, to $227.29 million on Wednesday, August 19, 2020.
- The record dollar supply at the forex market represents a clear departure from the low liquidity and the volatility that has characterized the market for some months. CBN’s intervention in the foreign exchange market could be to meet the increased dollar demand due to the anticipated resumption of international flight operations.
- Although there was a record increase in forex turnover for the day, the volatility of the foreign exchange market and the scarcity of the greenback is expected to persist. This is due to low oil prices and low foreign capital inflow into the country.
- The average daily forex sale for last week was about $24 million which represents a significant drop from the $50.6 million that was recorded the previous week. The remarkable FX turnover represents the first time it hit the $200 million mark since January 2020.
- Total forex trading at the NAFEX window in the month of July was $937 million compared to $875 million in June.
- The exchange rate disparity between the official NAFEX rate and the black-market rate has remained as wide as N91. Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS, and the NAFEX (I&E window). The wide disparity between the 2 rates has created huge arbitrage opportunities for some highly connected individuals.
Parallel Market: At the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N477/$1 on Wednesday, according to information from Abokifx, a prominent FX tracking website. This represents a N3 gain when compared to the N480/$1 that it exchanged on Tuesday, August 18.
NAFEX: The Naira depreciated against the dollar at the Investors and Exporters (I&E) window on Monday, closing at N386/$1.
- This represents a 2 kobo drop when compared to the N385.98 rate close that was reported on the last trading day, Tuesday, August 18.
- The opening indicative rate was N386.34 to a dollar on Wednesday. This represents a 31 kobo drop when compared to the N386.03 to a dollar that was recorded on Tuesday.
- The N386 to a dollar is the highest rate during intraday trading. It also sold for as low as N380/$1 during intraday trading.
Forex is sold at several prices and at different times during the day.
The central bank moved towards exchange rate unification two weeks ago after it devalues the official rate to N380/$1.
Our correspondent reported that due to dollar scarcity and low forex supplies, Nigerian banks have reduced dollar spending limit on naira debit cards. While some reduced it to $300, others went as low as $100. This appears to be the same measure adopted by banks during a similar situation in 2016.
