Banks Sell $172m as CBN, EFCC Battle Currency Speculators
The Nigerian currency market witnessed a slight improvement on Tuesday as the naira marginally gained against the United States dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM), closing at N1,542.58/$ compared to N1,551/$ recorded on the previous trading day.
This represented a 2.9 percent appreciation from Monday’s trading rate of N1,598.54 and a modest 0.58 percent increase from the previous day’s rate.
Data from the FMDQ Securities Exchange, the platform overseeing FX trading in Nigeria, revealed that the local currency reached an all-time intra-day high of N1,755 and an intra-day low of N1,050.
Moreover, the foreign exchange turnover surged to $172.14m from $66.43m and $117.32m recorded on the preceding two trading days.
Banks sold approximately $172m on Wednesday, marking a 47 percent increase from the $117m sold on Tuesday. While banks dominate the sale of forex on the FMDQ, the Central Bank of Nigeria and multinationals, particularly oil firms, also engage in the sale and purchase of forex on the platform.
However, the closing rate of the national currency at NAFEM on Wednesday at 1,542.58/$ widened the gap between the official and parallel market rates.
On Wednesday, the naira depreciated further to 1,900 against the dollar at the parallel market, exacerbating concerns over round-tripping and increasing the gap between the official and black market rates to over N300.
Currency analysts and Bureau De Change Operators projected that the local currency might hit an all-time low of 2,000/$ at the parallel market before the end of next week.
Abubakar Yahu, a BDC operator in Wuse, Abuja, attributed the volatility to high demand for the greenback. He remarked, “Today’s rate was at N1,900. We bought at N1,900/dollar and sold around N1,850 and N1,870. Some people say the rate may hit N2,000 by next week or before then.”
Lawan Lawal, another BDC operator in Allen Avenue, Ikeja, Lagos, stated that the local currency was bought and sold at N1,880/dollar and N1,860, respectively.
Mustafa Zakari, a BDC operator at the Lagos airport, highlighted the high volatility experienced in the naira-dollar exchange rate in recent weeks due to the activities of currency speculators.
The Economic and Financial Crimes Commission (EFCC) reportedly stormed the Wuse Zone 4 market in search of currency speculators on Wednesday, as part of efforts to restore exchange rate stability and boost forex liquidity. This initiative, supported by the Central Bank of Nigeria and the Office of the National Security Adviser, aims to tackle illicit financial activities.
Despite various policy interventions by the central bank to boost forex supply, challenges persist in the forex market. Analysts and stakeholders have raised concerns over transparency and disclosure at NAFEM, particularly regarding the significant gap between intra-day high and intra-day low rates. Chief Executive Officer of Cowry Treasurers Limited, Charles Sanni, and President of the Association of Bureau De Change Operators of Nigeria, Aminu Gwadabe, emphasized the need for enhanced transparency in the forex market.
