Forex turnover rose significantly by 379.6%, as the Naira’s exchange rate at the NAFEX window depreciated against the dollar to close at N394/$1 during intra-day trading on Tuesday, December 1.
Also, the Naira appreciated against the dollar, closing at N490/$1 at the parallel market on Tuesday, December 1, 2020, as the CBN’s new policy on diaspora remittances seems to be having a significant impact on the black market
In the amended procedures for receipt of diaspora remittances, the recipients are allowed to collect dollars and can sell at the black market in an apparent attempt to improve liquidity in the forex market and reduce the disparity between the black market and official market.
Parallel market: According to information from Abokifx – a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira appreciated against the dollar to close at N490/$1 on Tuesday.
This represents a N10 gain when compared to the N500/$1 that it exchanged for on Monday, November 30.
- The local currency had strengthened by about 7.8% within one week in September at the black market, as the CBN introduced some measures targeted at exporters and importers.
- This is to boost the supply of dollars in the foreign exchange market and reduce the high demand for forex by traders.
- However, the gains appear to have been completely erased with the recent crash of the exchange rate.
- The CBN has sold over $1 billion to BDCs since they resumed forex sales on Monday, September 7, 2020.
- This was expected to inject more liquidity into the retail end of the foreign exchange market and discourage hoarding and speculation.
- However, the exchange rate against the dollar has remained volatile after the initial gains made, following the CBN’s resumption of sales of dollars to the BDCs.
- Despite the CBN intervention, the huge demand backlog by manufacturers and foreign investors still puts pressure and creates a volatile situation in the foreign exchange market.