After the Central Bank of Nigeria (CBN) raised dollar supplies to banks, Nigeria’s foreign exchange liquidity grew by 204.37 percent, the largest in three months.
According to data from the FMDQ, the daily foreign exchange (FX) market turnover at the Investors and Exporters (I&E) forex window increased dramatically to $352.07 million on Wednesday, up from $115.67 million on Tuesday.
The CBN injected $200 million into all banks to address legitimate end-user needs, resulting in an increase in turnover.
FX daily turnover hit a new high of $471.85 million. The Nigerian Autonomous Foreign Exchange Fixing (NAFEX) became the official market on May 26, 2021, after the central bank of Africa’s largest economy depreciated the naira to N410.25k.
“The CBN provided $200 million early Wednesday to restore trust and curb speculation in the foreign exchange market,” says Ayodeji Ebo, Chapel Hill Denham’s head of retail investment.
This came after the bank’s regulator decided on Tuesday, following the Monetary Policy Committee (MPC) meeting, to stop selling foreign exchange to Bureau De Change (BDC) operators, causing the naira’s value to plummet against the dollar.
Previously, the central bank sold around $110 million per week to BDCs. The CBN’s governor, Godwin Emefiele, stated that the funds would be made available to commercial banks to fulfill legitimate FX demand in the future.
As a result, all bank clients who use foreign currency for lawful transactions such as school tuition, Personal Travel Allowance (PTA), Basic Travel Allowance (BTA), and medical payments will be asked to submit simple proof to assess the dollar.
Johnson Chukwu, the managing director/CEO of Cowry Asset Management Limited, is afraid that banks will not be able to supply the demand of the informal economy, which requires dollars to conduct daily business.
The boost in FX liquidity, on the other hand, helped to support the naira’s value on Wednesday.
On Wednesday, the naira gained 0.02 percent versus the dollar, closing at N411.60 per dollar, up from N411.67 per dollar on Tuesday.
The window for the Nigerian Autonomous Foreign Exchange Fixing (NAFEX).
On the parallel market, the naira dropped by 0.57 percent to N525 per dollar on Thursday, compared to N522/$ exchanged the day before.
Nigeria’s currency hit N522 per dollar on Wednesday, with dealers in the parallel market, sometimes known as the black market, observed stockpiling dollars for fear of losing money.
In a recent development, Nigerian deposit money banks told the public on Thursday that they are ready to carry out the CBN’s directive to provide FX services to consumers.
At a zoom meeting on Thursday, Herbert Wigwe, Access Bank’s group managing director/CEO, revealed this to the press.
This came after the bank’s regulator announced on Tuesday, following the MPC meeting, that it would no longer sell foreign exchange to BDC operators, causing the naira’s value to plummet against the dollar.
The CEOs of the banks in attendance generally agreed that they have the infrastructure and capacity to service end customers’ legitimate FX demand.
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