The naira suffered a fresh slide both at the official and parallel foreign exchange markets (black market) on Friday.
The national currency depreciated to on Friday N1,670/$ from N1,600/$ recorded at the close of trading activity on Thursday at the parallel market, while it closed at an official rate of N1,537/$ on Friday from N1,498/$ recorded the previous day.
The fresh rates also created N133 gap between the official and parallel market, signalling fresh concerns about round-tripping.
This development is despite increased dollar supply worth a total transaction volume of $3.83bn in eleven days of trading activities through the Nigerian Autonomous Foreign Exchange by Deposit Money Banks.
Data obtained from FMDQ Securities Exchange, a platform that publishes official foreign exchange trading in the country, between February 2 and February 15, showed that the increase in forex transactions.
Commercial banks, Central Bank of Nigeria and international oil firms are the major sellers on forex at NAFEM.
The improved liquidity at NAFEM followed a directive by the Central Bank of Nigeria which had asked banks to sell their excess dollar stock and improve liquidity in the FX market.
The FMDQ report indicated that the banks led others to sell $1.97bn in the first week of the CBN circular which had mandated banks not to exceed a new threshold in their FX prudential guidelines.
Penultimate week, a breakdown of the daily activities from Monday to Friday compiled by our correspondent showed that on Monday, the official FX market recorded a turnover of $584.53m; Tuesday, it reduced to $465.29m; on Wednesday it was $209.93m; Thursday it was $321.23m and on Friday, it was $253.77m.
Further analysis for the week ending showed that the supply started on a low at $116.11m on Monday; it increased by $292.3m to $381.92m on Tuesday but dropped to $117.87m on Wednesday. On Thursday, the supply increased to $336.11m.
Recall that in clusters of guidelines, the CBN ordered Deposit Money Banks to sell their excess dollar stock over the growing trend of banks holding large foreign currency positions. It also warned lenders against hoarding excess foreign currencies for profit.
On Thursday, the apex bank released another set of guidelines that stopped banks from paying Personal Travel Allowance to their customers.
In a second circular signed by its Director, Trade and Exchange Department, Hassan Mahmud, it also asked International Oil Companies not to repatriate all their revenue to their parent companies at once. The apex banks also, in the third circular, reviewed its guidelines to stop under-invoicing of exports and over-invoicing of imports.
The Governor of the Central Bank of Nigeria, Olayemi Cardoso, who also confirmed the significant rise in FX transactions during an interactive session organised by the Senate Committees on Finance, Appropriations, Banking Insurance and Other Financial Institutions, saying recent reforms initiated by the central bank were yielding positive results in the FX market as evidenced by the liquidity boost.
Nevertheless, despite the Central Bank’s efforts to boost forex supply through various policy interventions, challenges persist in the forex market.
The gap between the rates in the official market and the parallel market is once again widening, raising concerns about the potential resurgence of roundtripping activities.
In response to the circular, banking institutions and IMTOs are gearing up to implement operational adjustments to accommodate the revised remittance framework by issuing notices to their customers.
Furthermore, the Central Bank’s decision is expected to engender a ripple effect, catalyzing increased remittance inflows and bolstering the country’s foreign exchange reserves.
On the official segment of the foreign exchange market, the naira started at an all-time low of N1,534/$, indicating serious consequences on the price of goods and services on Monday.
The naira gained marginally on Tuesday to N1,499/$ but fell to N1,503.38/$ at the close of trading on Wednesday before recovering to N1,498/$ at the close of trading activities on Thursday before ending the week at the rate of N1,537/$.
Figures compiled by Saturday PUNCH from the parallel market showed the naira depreciated to N1,670 on Friday from Thursday’s rate of N1,600/$. This is about N97 or 6.45 per cent higher than the N1,503/$ at the beginning of the week.
On the parallel segment of the foreign exchange market, the naira depreciated to N1,600/$ Thursday’s rate is about N167 or 11 per cent higher than the N1,503/$ at the beginning of the week. On Tuesday, it was sold at N1,530 before jumping to N1,595 on Wednesday.
The naira depreciation followed a strong demand for dollars by speculators as well as individuals travelling for business, tourism, education and health, according to currency dealers.
Currency traders in Abuja, also known as Bureau De Change operators, informed Saturday PUNCH that the dollar sold at that rate due to the consistent demand for the greenback
A BDC operator, Ibrahim Yahu, said The dollar was already approaching N1,700.
He said, “We started today’s trade at N1,610 but it just jumped because of demand to N1,680 before reversing back to N1,670. If the market is too much, there is nothing we can do. If care is not taken, it will go back to N1,680.”
Another BDC operator, Abdullahi Taura, complained severely. He said the increase was getting too much stressing that something must be done urgently.
NACCIMA demands action
Meanwhile, the National President of the Nigerian Association of Chambers of Commerce, Industry, Mines, and Agriculture, Dele Oye, has called on the government to intensify efforts towards addressing the twin economic challenges of naira devaluation and inflationary pressure in the country
In a statement, the NACCIMA boss said a stable currency will not only make agricultural inputs more affordable but will also bolster consumer purchasing power.
Oye noted that the current exchange rate exerts inflationary pressure on input costs, thereby affecting overall food prices, reiterating the need for a robust economic policy aimed at stabilising the Naira.
He said, “A robust economic policy aimed at defending the Naira to reach an acceptable exchange rate of 750 Naira to one USD is essential. A stable currency will not only make agricultural inputs more affordable but will also bolster consumer purchasing power,” he added.
“To further incentivise local production, we urge the government to facilitate access to more single-digit interest loans and grants for our farmers. This financial support is pivotal in empowering farmers to scale up production and adopt modern agricultural practices.”
The NACCIMA boss also commended the recent resolutions by President Bola Ahmed Tinubu and State Governors to prioritise and boost local food production as a strategy to achieve food security in the Country and improve the lives of the people.
He said, “I am expressing our support for the recent resolutions by President Tinubu and state governors to prioritise and boost local food production as a strategy to achieve greater food security in Nigeria.
“We commend the President’s directive to state and federal government agencies to enhance collaboration in bolstering local food production rather than resorting to food importation and price control. This approach aligns with NACCIMA’s core objectives of championing the agricultural value chain and supporting local producers. It is a vital step toward self-sufficiency and economic resilience.
“However, we believe that the issue of rising food costs is multifaceted. While local production capacity is a critical factor, we cannot overlook the significant impact of the depreciating value of the Naira. The current exchange rate exerts inflationary pressure on input costs, thereby affecting overall food prices.”
Speaking further, Oye appealed for the enhancement of security and infrastructure in farming communities. These measures, he said, would mitigate the risks faced by farmers, reduce production bottlenecks, and increase efficiency throughout the agricultural value chain.
“We concur with the President’s call for vigilance against hoarding practices that exploit consumers and distort market dynamics. NACCIMA advocates for fair trade practices that encourage competitive pricing without compromising the welfare of our local producers and consumers,” he added.
Oye plea comes in the wake of a protracted inflationary pressure and exchange rate crisis that has hit the Nigerian economy.
On Thursday, data from the National Bureau of Statistics on Thursday showed that Nigeria’s inflation rate climbed to 29.90 percent in January 2024 from 28.92 percent recorded in the previous month.
