Naira appreciates at interbank, holds steady at parallel market

The Nigerian naira on Wednesday, October 5, remained at N476/$1 in the parallel (black) market as it was on Tuesday, October 4.

This left naira’s black market value unchanged since it dropped 1 point from N475 to the green back.

Currency dealers at the same market segment said the local currency exchanged for N510 to the Euro and N585 to the British pound. This is just as activity level at the interbank market buoyed 3.12 per cent as the local currency settled at N310.24 to the dollar compared to N320.312 to the dollar which it sold for on Tuesday.

The naira remained pressured last week as a result of illiquidity in virtually all segments of the foreign exchange (FX) market as the naira/dollar exchange rate at the parallel market crashed to an all-time low of N490/$1 on Friday compared to N440/$1 on Monday.

The Apex Bank’s attempt to centralize the inflow of FX to official channels (through registered international money transfer operators (IMTOs) and the interbank by suspending unregistered IMTOs while threatening to sanction individuals operating as international money transfer agents continues to constrain supply of FX to the parallel market.

However, the exchange rate at the interbank has remained broadly stable as a result of frequent interventions by the apex bank. The naira/dollar spot rate opened last week at N308.50/$1 on Monday, but depreciated to N312.99/$1 by midweek before appreciating to N305.31/$1 by Thursday as the CBN intervened with dollar supply. The interbank spot rate closed the week at N311.62/$1.

According to dealers at Afrinvest, in the futures market, investors continue to take advantage of the Over The Counter (OTC) FX Futures to hedge exposures to the Nigerian market in a bid to limit currency movement risk. Accordingly, the total value of open OTC FX Futures contracts rose by $614.1 million Month on Month (M-o-M) at the end of September.

Meanwhile, the House of Representatives on Wednesday expressed concern over continuous fall of the naira against major currencies and resolved to investigate the foreign exchange transaction process.

This was sequel to a motion entitled “Call for Investigation of the Central Bank of Nigeria’s Forex Policies” sponsored by Rep. Ali Isa (PDP-Gombe).

Moving the motion, Isa said that in spite of the weekly releases of foreign exchange by the Central Bank of Nigeria (CBN) to the Bureau de Change (BDCs) and the banks, the value of naira had continued to depreciate.

Contributing to the debate, Rep. Mojeed Alabi (APC-Osun) expressed dismay that the CBN governor had continued to turn down invitations to him to the house to explain some of the fiscal policies to the legislators.

According to him, for failing to honour the summons of the house over the falling value of the naira, the CBN governor and his team should be sacked.

Also, Rep. Olawale Raji (APC-Lagos) decried the poor state of the naira and inconsistent fiscal policies, saying that Nigeria was the only country where “black market” figures were quoted as official.

Who is in charge of our Forex, CBN or the black market? This is the only country in the world where the black market rates are quoted on television.

If Nigeria were to be a normal country, the CBN governor and his team should be sacked,” he said.

However, the Minority Leader of the house, Rep. Leo Ogor, called for restraint on the issue, saying that the situation did not warrant the call for removal of CBN governor. He said that the legislature in conjunction with executive should find solution to the problem.

The only thing we do is pay lip service,” he added.

After the debate, the lawmakers resolved to set up an ad hoc committee to interact with the BDCs and other establishments that receive foreign exchange directly from the CBN to give detailed explanation of how they utilised the funds.