The Nigerian naira has recovered from its August losses as the apex bank’s price verification system goes live today, August 31, 2023. According to FMDQ data, the naira increased by 4.8% to N738.18 per US dollar (USD) in the Investors and Exporters FX market.
On Tuesday, the local currency exchange rate was N775.34, while the current price had crossed N803 per greenback in the official window following the official devaluation in June. According to FX traders, the main disadvantage of exchange rate convergence is a lack of foreign currency inflows – hot money or direct investment – into the local economy.
As a result of this, forex supply by the Central Bank of Nigeria to support the local currency at the official window for investors, and exporters has been minimal, and it continues to drop despite the fact that the authority has maintained a stance to intervene in the FX market when necessary.
Unfortunately, the balance in Nigeria’s gross external reserves has remained depressed due to lower foreign receipts from oil exports. The oil market remains relatively bullish compared with the oil price benchmark used to prepare a budget for the current year.
However, the country has continued to grapple with meeting its Organisation of Petroleum Exporting Countries daily quota.
On Wednesday, Brent crude rose 0.57% to $85.98 per barrel, while WTI crude gained 0.89% to $81.88 per barrel. Oil futures rose above $81 per barrel on Wednesday, extending gains for the fifth straight session after EIA data showed a larger-than-expected weekly crude inventory draw.
Despite the rally in the global oil market, Nigeria’s external reserves settled below $34 billion and its net position has been subjected to review among investment firms – local and international. Naira Steadies as Banks Issue Update on FX Purchase
In the parallel market, demand for foreign currency slowed down after spurious demand that had pushed the exchange rate to about N1000.
As speculators began to watch from the side the impacts the CBN price verification portal would have on the market, the exchange rate was muted at N920 in the parallel market.
Recall the CBN through its circular, dated 17 August 2023, announced the launch of its Price Verification System Portal, for importers to generate Price Verification Reports for all Form M applications. This will require FX users to create their separate accounts to access FX from the official window.
Local deposit money banks said going forward, this report will be a prerequisite to submitting Form M applications on the CBN Single window. Bankers told MarketForces Africa that the directive takes effect from Thursday, 31 August 2023 and the portal will be live on the same day.
