Naira loses at official market, closer to convergence rates

The Nigerian currency, Naira, which had, on Monday, lost slightly at Nigeria Autonomous Foreign Exchange Fixing (NAFEX) window, rebounded on Tuesday to gain 0.11 per cent. But, it dropped further at the official foreign exchange market, while edging closer to the desired convergence rates pursued by the Central Bank of Nigeria (CBN) and concerned financial stakeholders.

The Naira, at the close of trading activities ended at 305.75, against an already depreciated rate of 305.70, while compared to 305.60 sold the previous week. Although, it remained steadied at the parallel market, as it was seen hovering between 368 and 370 depending on the buyer bargaining power and the volume he is buying because the rate varies from one parallel market operator to another.

The naira, however, strengthened against the pound sterling at the unofficial market to exchange at 475compared to 477 sold on Monday but left unchanged at 431 to the Euro on Tuesday.

At NAFEX, the Naira, opened at a declined rate of 362.97 against 361.59, representing 0.38 per cent depreciation, but closed strong at 359.60 compared to 360 traded the preceding day, representing a growth of 0.11 per cent, data obtained from FMDQ OTC has shown.

Consequently, the turnover recorded Tuesday at the autonomous FX window, slide to $165.29 million, which was weaker than $212.43 million declared on Monday; and $236.97 recorded on Friday.

It would be recalled that the Central Bank of Nigeria (CBN) on Monday, offered $195m in three segments of the Foreign Exchange Market (Forex) to boost liquidity in the operation.

Isaac Okorafor, CBN’s Acting Director, Corporate Communications Department explained that in the wholesale segment of the inter-bank Foreign Exchange market, the bank auctioned 100 million dollars and also intervened in the Small and Medium Enterprises (SMEs) with 50 million dollars.

He said the bank also offered the invisible segments, with 45 million dollars.

He said the bank had kept fate with its resolve to ensure that there was sustained liquidity in the market following pressures on the market from those seeking forex for school fees and vacations.

He stated that the bank would also ensure that genuine requests for FOREX were met, as well as improved liquidity and flexibility in the market.

Meanwhile, the nation is finally down to what seems likes just two exchange rates; one is the official central bank rate of 305 per dollar, while the other is between 360 to 365 at the interbank and parallel market.

Monetary policy officials unified some of their multiple exchange rates as they directed currency dealers to quote naira levels used in actual trades for August.

The move, according to Bloomberg, is “to entice back bond investors who fled in 2014 and 2015 as oil prices collapsed and the central bank tightened capital controls.”

Since the CBN introduced the investors window known as Nafex in April, banks have been trading but were not allowed to publish their trades.

In August however, the FMDQ OTC Securities Exchange, asked banks to start quoting Nafex rates, effectively merging that market with the main interbank one.

According to Bloomberg, “the move immediately weakened the naira’s interbank price 14 percent to about 365 per dollar, knocking $6.5 billion off the stock market’s value”.