Naira steady 410/$1 at parallel market

The Nigerian currency, the naira on Wednesday closed at 410 to a dollar, the same rate it traded the previous day, which indicated a drop of five points from 405 it exchanged on the first trading day of the week at the parallel market.

This was contrary to the widely expected new closing rate for the local currency, as forex traders believed that the Central Bank of Nigeria (CBN) improved dollar supply will prop up the local currency.

The CBN had on Monday auctioned $100m in forwards to be settled between one week and 30 days’ time, as against 60-day contracts it had written previously, shortening the settlement period on forward contracts to inject liquidity.

Also, at the official forex market, nothing seems changed as the naira closed at 306.10 per dollar on Wednesday, the same rate it sold on Tuesday.

But the naira weakened yesterday against Euro and Pound, closing at 435 and 510.50 against 432 and 501 sold on Tuesday, respectively.
On the interbank market yesterday, the naira stood at 315.00 to the dollar, closing at 392.30 per pound and 334.62 to the Euro.
However, the central bank had on Monday opened a special foreign exchange window for the Small and Medium Enterprises, and on Wednesday made spot sales totaling $100 million to interested Small and Medium Enterprises (SMEs) through its newly opened Special Window for small scale importers.

The move was said to enable the SMEs use the funds for the importation of critical and eligible finished and semi-finished goods.

The CBN also released its results of 7 – 30 days forwards wholesale of $100 million, even as authorised dealers subscribed fully to the $100 million offered by the CBN at the forex auction in the interbank wholesale window on Monday.

CBN’s Acting Director, Corporate Communications, Isaac Okorafor, made this known to newsmen that the new window for SMEs provides small scale importers an avenue to source forex to boost their respective businesses through the importation of eligible finished and semi-finished items.
He added that no SME will be allowed to transact more than $20,000 per quarter.
Some authoritative sources at the CBN have also hinted that in an attempt to boost forex supply, the CBN will soon begin spot forex auction sales, and also open a special window for investors to trade freely for certain eligible transactions, particularly dividends and investment remittances .
There have been concerns raised over the ability of the apex bank to sustain the current rate of liquidity in the market. Some experts have, however, pointed out that going by the current level of reserves, the accretion from oil revenues and the subdued level of demand, the CBN has the capacity to sustain supply even if it has to keep doing so for the next three months.

Mr. Okorafor, explained that the apex bank’s special intervention was necessitated by its findings that a large number of the SMEs were being crowded out of the forex space by large firms.F”