In response to expectations that the Central Bank of Nigeria (CBN) will support liquidity in the currency markets in the next week, the value of the Nigerian naira increased somewhat in the foreign exchange market, gaining 0.98% week over week.
The naira finished at N1482.82 per US dollar at the official window, which is less than 1% higher than the previously announced opening spot rate of N1497.33. However, the most recent changes in the unofficial currency market imply that the central bank could put a stop to its subsidized forex sales to bureau de change operators (BDCs).
All BDC operators have been instructed by CBN to reapply for fresh operating licenses. This instruction is a component of a larger regulatory reform that aims to enhance the nation’s BDCs’ transparency and operational efficiency.
All existing BDCs are required to reapply according to their chosen tier or license category as outlined in the new guidelines. They must meet the minimum capital requirements for their chosen category within six months, starting from June 2024.
US dollar liquidity challenge has impacted exchange rates across markets, negatively. The naira had appreciated strongly in April before exchange rate turned 360 degree.
Analysts attribute FX liquidity decline to CBN’s lack of intervention in the FX market. The apex has reduced forex injections into currency markets on account to weak FX reserves and moderate inflows from foreign portfolio investors. This fx liquidity challenge in the official and parallel markets.
In a related development, Nigeria’s foreign reserves recorded a further accretion last week, as the gross reserves level increased by USD73.05 million to USD32.74 billion.
