Naira gains further at parallel market, drops at official interbank

The Nigerian currency, Naira, on Monday, gained further to close at 365 to a dollar at the parallel market, but depreciated at the official interbank at 305.95 against 305.90 traded on Friday.

The Naira was sold over the weekend at 367 per dollar, which was better than 369 exchanged on Thursday, but recorded more points at the end of first trading day of the week at 365, however, remained unchanged against the Euro and Pound sterling at 410 and 465, respectively.

At the Investors & Exporters Foreign Exchange (I&E FX) window, the local currency, opened at 366.31 and closed at 359.00, representing appreciable 7.44 points compare to 366.44 sold at the last trading day of the preceding week.

The local naira currency came close to converging at the investor foreign exchange window and black market last week, with analysts attributing the development to increased dollar liquidity in the foreign exchange market.

Therefore, in a continued effort to close the gap between the official and the unofficial rates, the Central Bank of Nigeria (CBN) on Monday, said it will sell $100 million at a special foreign currency auction, the latest in a series of interventions that had yielded positive results in the foreign exchange market.

In a notice to commercial lenders, the regulator said the dollar auction would be both for spot and forward transactions which would be settled within the next 60 days.

The CBN has been intervening on the official market in the last few months in an attempt to narrow the spread between rates on the official market and black market. It has sold more than $5 billion since February.

Nigeria is battling a currency crisis brought on by low oil prices, which has tipped Africa’s biggest economy into recession and created chronic dollar shortages.

Nigerian authorities want to attract foreign investors and at the same time maintain a strong currency to ward off inflation.

Meanwhile, foreign investors are pushing for the adoption of the interbank rate as the only official exchange rate.

The interbank rate closed on Friday at N315.10/$1. It has remained the most stable exchange rate in the last six months.

The new demand by investors, followed earlier calls by the International Monetary Fund (IMF) and stakeholders that the CBN unify exchange rates. The Executive Board of the IMF’s Article IV Consultation on Nigeria had, in March, urged the authorities to remove restrictions and multiple currency practices.

In a report released at the weekend, Afrinvest West Africa Limited, an investment and research firm, confirmed investors’ demand on the CBN to adopt interbank rate, and said the investors are insisting that although the CBN’s policies over the past months have led to a convergence between parallel and official market rates, the last leg of the reform, which is replacing multiple exchange rates with a transparent interbank market is still pending.

It said the opening of different Forex windows and targeted intervention by the CBN, which is in excess of $5 billion in the last four months, have had a positive knock-on impact on capital liquidity and resulted in a stronger naira in the parallel market.

Since the start of a prolonged global oil price drop in the second half of 2014, the Nigerian economy has recorded a significant downturn in performance, as plummeting government revenues and the resultant forex crisis dragged the economy into its first recession in 25 years.
The country currently has not less than 10 different exchange rates, which many stakeholders said needed to be harmonised.