Naira Weakens As Dollar Sales Plunge In Nigerian Forex Market By $252m To $84.1m

Dollar sales in Nigeria’s Autonomous Foreign Exchange Market (NAFEM) took a nosedive, dropping by $252 million to $84.1 million on Friday, marking a 74 percent decline from the previous day’s transactions totaling $331.1 million.

This plunge coincided with a depreciation of the naira, which fell to N1,537/$ from N1,498/$ recorded at the close of Thursday’s trading.

Analysis of data from FMDQ Securities Exchange revealed the stark decline in forex turnover, plummeting by 74 percent to $84.10 million on Friday from $336.11 million on Thursday. While commercial banks were among the entities selling dollars at NAFEM, others included the Central Bank of Nigeria, oil firms, and multinationals.

Simultaneously, at the parallel market, the naira also experienced devaluation, sliding to N1,670/$ from N1,600/$ on Thursday amid steady demand for the greenback.

READ ALSO: CBN Forex Policies Faltering As Naira Edges Closer To N1,700/$1: Is Stability Possible Amidst Structural Challenges?

Throughout the week, forex supply exhibited fluctuations, starting low at $116.11 million on Monday, surging to $381.92 million on Tuesday, and then dropping to $117.87 million on Wednesday before rising again to $336.11 million on Thursday.

Market experts attribute the depreciation of the naira to robust demand for dollars by speculators and individuals engaged in business, tourism, education, and health-related travel.

The banking sector, responding to directives from the Central Bank of Nigeria (CBN), engaged in substantial dollar sales, amounting to $1.97 billion in the first week following the implementation of new FX prudential guidelines.

The CBN’s measures included mandating banks not to exceed specified thresholds in their FX holdings and discouraging hoarding of foreign currencies for profit.

In subsequent directives, the CBN prohibited banks from disbursing Personal Travel Allowance to customers and urged International Oil Companies to stagger repatriation of revenue to their parent companies. Additionally, revised guidelines aimed to curb the under-invoicing of exports and the over-invoicing of imports.

Despite these interventions to bolster forex supply, challenges persist in the market, evidenced by the widening gap between official and parallel market rates, raising concerns about the potential resurgence of round-tripping activities.

Responding to the CBN’s directives, banking institutions and International Money Transfer Operators (IMTOs) have initiated operational adjustments to adhere to the revised remittance framework, issuing notices to customers accordingly.