Dollar supply rises to $11bn, naira closes 1,572/$

Forex turnover at the official foreign exchange market has increased to $11.43bn within over two months of trading following fresh reforms by the Central Bank of Nigeria.

An analysis of reports and data of daily forex transactions recorded on the website of FMDQ Securities, a platform that publishes official foreign exchange trading in the country, indicated that the figure increased by 185.75 per cent or $7.43bn between January and March 15th through the Nigerian Autonomous Foreign Exchange by Deposit Money Banks.

Commercial banks, CBN and international oil firms are the major sellers of forex at NAFEM.

The improved liquidity at NAFEM followed a directive by the CBN on February 1, 2024, asking banks to sell their excess dollar stock to improve liquidity in the FX market within 24 hours.

According to officials, the central bank believes some commercial banks hold long-term foreign exchange positions to enable them to profit from the volatile movements of exchange rates.

Although, the naira fell to an all-time low of N1,850/$ at the parallel market, the move aimed at unifying the official and parallel market exchange rates was approved by economists and other stakeholders.

However, they challenged the CBN to clear FX backlogs estimated at over $5bn and fund FX demands at the official market. This, they said, would forestall a situation whereby the parallel market rate would move away from the official rate again.

A further breakdown of the dollar supply showed that the forex market recorded a $4bn turnover in January and increased by $3.3bn within two weeks (February 2 to 16) of implementing the new rules.

In the weeks that followed, the supply stabilised, recording $890.65m between February 19 and 23. This inflow increased to $953.02m in the week ending February 26 to March 1.

Between Monday, March 4 and 8, the market got a gain of $1.07bn as forex turnover but reduced to $848.14m last week (March 11 to 15).

Meanwhile, the naira is expected to stabilise further this week, following moderation in demand pressure, amid dollar supply decline.

On Monday, the naira appreciated marginally against the United States dollar to N1,572.86 at the official market from N1,602.43 recorded last week Friday.

The intraday high closed at N1,640/$ on Monday, lower than N1,615.50 per dollar on Friday on the spot. Also, the intraday low depreciated to N1,400 from N1,524.99 on Friday.

The daily FX market turnover also appreciated by 2.19 per cent to $140.45m on Monday compared to $137.43 million recorded on Friday.

The foreign exchange market ended last week on a positive note as the naira appreciated against the dollar across official and parallel markets.

Last week, the naira gained 0.95 per cent as the dollar was quoted at N1,602.75 on Friday, stronger than N1,617.96 quoted on Monday, the beginning of the trading week, at the official FX market, according to the data compiled from the FMDQ Securities Exchange.

At the parallel market, the local currency was sold between N1,600 and N1,610 depending on location on Monday. This was after it closed the trading week flat by 0.31 per cent to N1,605 on Friday as against N1,610 on Monday, data collated from different street traders and trading platforms showed.