Forex turnover dropped by 65.6%, as the Naira’s exchange rate at the NAFEX window depreciated against the dollar to close at N395/$1 during intra-day trading on Wednesday, December 2.
Also, the Naira appreciated against the dollar, closing at N485/$1 at the parallel market on Wednesday, December 2, 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 the official market.
ABCON President, Aminu Gwadebe, had blamed the crash of the naira on illegal activities that include hoarding, speculation, illegal cash evacuations through the nation’s borders, use of the dollar for gratification and so on.
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 N485/$1 on Wednesday.
This represents a N5 gain when compared to the N490/$1 that it exchanged for on Tuesday, December 1.
- 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.