Nigerian Naira Appreciates to N1,400/$1 as Central Bank Cracks Down on Excess Dollars.
Nigeria’s currency is recovering from its losses against the United States dollar at the parallel and official markets after the Central Bank of Nigeria (CBN) intervention to improve supply of the greenback in the economy.
This is as the Association of Bureau de Change Operators of Nigeria (ABCON) has debunked news of shutdown of foreign exchange sales in Abuja, saying, it is misinformation targeted at creating confusion in the market.
Naira gained 8.57 per cent in less than 24 hours to N1,400 on Thursday after tipping at N1,520 per dollar on Wednesday at the parallel market, commonly called black market, data collated from different street traders revealed.
The CBN removed the cap on the allowable limit of -2.5 per cent to +2.5 per cent around the previous day’s closing rate for the IMTOs. This adjustment signifies a shift in the regulatory framework, providing IMTOs with more flexibility in determining exchange rates.
This comes after the banking and financial institutions regulator on Wednesday announced limits on how much banks can hold in foreign currencies and expressed concern about the growth of forex exposures on their balance sheets after the local currency tumbled against the U.S. dollar.
One of the street traders told BusinessDay that there is enough dollars in the market due to the CBN’s new forex policy and that demand has reduced as the Chinese, who are major consumers of dollars, have gone on holiday.
In a new circular (TED/FEM/FPC/GEN/001/003) dated January 31, 2024, the CBN announced a significant change in the regulations governing exchange rate quotes by International Money Transfer Operators.
Previously, IMTOs were required to quote rates within an allowable limit of -2.5 percent to +2.5 percent around the previous day’s closing rate of the Nigerian foreign exchange market, according to the circular TED/FEM/PUB/FPC/001/009 dated September 13, 2023.
In a move aligning with the CBN’s commitment to liberalise the Nigerian foreign exchange market, the new circular permits IMTOs to quote exchange rates for naira payout to beneficiaries based on prevailing market rates at the Nigerian foreign exchange market.
This is to be done on a willing seller, willing buyer basis.
The circular, signed by Hassan Mahmud, director of the trade and exchange department, supersedes the previous circular (TED/FEM/PUB/FPC/001/009) issued on September 13, 2023.
All Authorised dealers, International Money Transfer Operators, and the general public are advised to take note of this development and ensure compliance with the revised regulations. The CBN’s decision reflects ongoing efforts to adapt and enhance the dynamics of the Nigerian foreign exchange market, the circular stated.
“The reason for the removal of the cap is to incentivize the IMTOs to transparently transfer their receipt into the country,” Aminu Gwadabe, president, Association of Bureau De Change Operators of Nigeria (ABCON), said.
Meanwhile, in a statement issued and signed by the president of the body, Aminu Gwadabe, ABCON noted that the directive to shutdown transactions did not emanate from the national body or from its zonal council in Abuja.
Speaking with LEADERSHIP, Gwadabe had noted that a few traders in Abuja had made the decision to close shop, adding that it was not the decision of the association. He stated further that the association is engaging the relevant authorities.
The statement, which the association said is to provide clarification and dispel any misconceptions regarding recent rumours of a shutdown of for-ex transactions in Abuja, stated that, “contrary to these unfounded reports, We want to assure you and the public that this information is not from our central body and nether the zonal council.
“As professional and licensed BDC operators guided by the Central Bank of Nigeria regulation. We urge our members to be law abiding in the day to day activities in the financial markets, including foreign exchange activities and continue to operate smoothly and without interruption because no directive has been given by our Association.
“It is crucial to address misinformation promptly to avoid unnecessary panic and confusion among the public, businesses, and investors. Please consider disseminating this information through your platform or relevant channels to help correct any misconceptions.”
Findings by this newspaper have showed that normal trading activities of foreign exchange continued in the parallel market yesterday contrary to speculations that members of the Abuja chapter of Bureau De Change had announced the suspension of operations.
When our correspondent visited the popular zone 4 area of the Federal Capital Territory, regular activities were ongoing with $1 exchanging for N1,500 as at 4pm yesterday.
However, sources in the market told this newspaper that the association members had planned not to open shops today in protest against how the naira is jumping. They said they are uncomfortable with the trend because it’s also affecting their business.
A BDC operator who identified himself as Mallam Abdulsalam said the members are also angry that the “government’s promise to pump money into the market hasn’t happened.”
Speaking on the exchange rate improvement, Gwadabe said, “already we have started seeing the local currency appreciating against the dollar in the parallel market by about 6 percent from N1520 yesterday to N1420/$ this afternoon in the market.
“We therefore call on the management of the apex bank to sustain the tempo. There is the urgent need in the immediate time to consider the effective transmission mechanism roles of the BDCs through their inclusion as the third leg of the market,” he said.
The pressure on the FX market eased on Thursday as the naira recovered after commercial banks offloaded dollars into the official market, in response to 24 hours given by the CBN.
This was seen as the volume of dollar transactions by willing buyers and willing sellers, consisting of banks, exporters and investors, increased by 85.36 percent.
The daily FX market turnover increased to $134.07 million on Wednesday from $72.33 million recorded on Tuesday at the official market.
Consequently, Naira gained 1.85 percent as the dollar was quoted at N,1455.59 on Wednesday compared to N1,482.57 quoted on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), data from the FMDQ indicated.
Also, the intraday high appreciated by 1.46 percent to N1,509 on Wednesday as against N1,531 quoted on the spot on Tuesday. The intraday low steadied at N789 per dollar.
Naira appreciation refers to an increase in the value of the Nigerian Naira compared to other currencies. For individual households, it generally means that imported goods may become more affordable, potentially leading to lower prices for imported products, according to analysts.
Businesses, especially those that rely on importing raw materials or goods, may experience reduced production costs. However, businesses relying on exports might face challenges, as their products may become more expensive for foreign buyers, analysts said.
