The Nigerian currency had another 0.99% depreciation, closing at N1,433.89 per US dollar on the country’s independent foreign exchange market. Investment businesses highlighted statistics from the FMDQ platform, which showed a more than 20% reduction in the volume of US dollars exchanged in the official market.
This is happening in spite of the apex bank’s efforts to raise foreign exchange availability and improve the value of the local currency. The naira closed lower on the parallel market as FX users traded N1,455 for every US dollar.
The Central Bank of Nigeria (CBN) published multiple circulars last week that were intended to improve foreign exchange liquidity, which caused the financial markets to see a lot of activity.
After the Naira declined in value to as low as N1482.57 after warning from the CBN against the unethical reporting practices of authorized dealers, the currency saw an initial appreciation of N1419.86 on Monday.
Last week, the CBN implemented various policies, including directing banks to maintain a zero net long open dollar position, discontinuing daily CRR debits for banks, and applying the existing CRR ratios of 32.5% for commercial banks and 10% for merchant banks to increase in banks’ weekly average adjusted deposits.
Similarly, the CBN also prohibited banks and fintech operators from conducting international money transfer operator (IMTOs) services, permitting banks to act solely as agents. Furthermore, the central bank ceased IMTOs from engaging in outbound transactions and removed the transaction cap for International Money Transfer Operators.
According to data from FMDQ, there was a notable surge in market turnover after the announcements. Nonetheless, forex turnover experienced a 20.26% decrease, settling at US$465.29 on Tuesday, 6 February.
Despite the optimism surrounding the new FX rules introduced by the apex bank, aimed at augmenting dollar supply from commercial banks and stabilizing the naira in the short term, volatility persists.
“We however note that it is still early in the implementation of these measures and more time is required to assess the impact”, CSL Stockbrokers said in its Tuesday update.
