Forex turnover dropped by 22.9%, as the Naira’s exchange rate at the NAFEX window appreciated marginally against the dollar to close at N394.67/$1 during intra-day trading on Wednesday, December 9.
Also, the Naira appreciated against the dollar, closing at N478/$1 at the parallel market on Wednesday, December 9, 2020, as deposit money bank begin the payment of diaspora remittances in dollars as had been directed by the Central Bank of Nigeria.
Nigeria’s external reserve lost $452 million in about a month as it hits $35.211 billion as at December 4, 2020. The continuous drop in the external reserve will limit CBN’s ability to intervene in the foreign exchange market, thereby putting pressure on the naira.
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 N478/$1 on Wednesday.
This represents a N5 gain when compared to the N483/$1 that it exchanged for on Tuesday, December 8.
- 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.