Naira sustains recovery at N746/$ in official market

The naira yesterday recorded a massive gain of N36 to close at N746/$ in the Investors and Exporters (I&E) window- official market.

Thursday’s rebound showed two-day straight gain in the official market over improved liquidity and transaction activities.

The local currency had closed at N782/$ on Wednesday and N788/$ on Tuesday.

Data from FMDQ Exchange indicated gradual rise in market liquidity from over $63 million turnover on Tuesday to $90 million on Wednesday, contributing largely to Thursday’s rate recovery. Thursday’s turnover data was not ready by the time of filing this report.

The naira had on Monday closed at N744/$ at the I&E window, made a N44/$ loss on Tuesday and a sudden rebound on Wednesday and Thursday.

However, the parallel market was where the naira faced sustained pressure, with the local currency closing at N803/$ on Thursday. This created of N57/$ premium between the official and parallel market rates.

The Central Bank of Nigeria (CBN) unified all exchange rates into the I&E window and allowed market forces to determine exchange rate for the naira.

Data from FMDQ Exchange showed gradual drop in market liquidity from over $260 million turnover to less than $70 million in recent weeks.

The I&E window was activated in June 2017, and represents the broader forex market, where dollars sourced from autonomous sources are traded between Authorised Dealers, Clients and the CBN.

This forex window is also the underlying market for the FMDQ Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) benchmark.

The rate at the I&E window has come to represent the official rate for the naira after the Central Bank of Nigeria (CBN) abolished multiple exchange rates in the economy.

The unification of multiple exchange rates into the I&E window has been described by stakeholders as a game changer in the apex bank’s plan to achieve exchange rate stability.

The policy, which allowed forex dealers and investors to buy and sell dollars at exchange rate of their choice provided they can find buyers. This move aims to ensure that the naira is allowed to trade at the market-clearing rate in the forex market.

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe spoke on the need to continuously raise dollar liquidity to sustain naira recovery at both official and parallel markets.

He called on the CBN to ensure liquidity in the retail end of the market by de-monopolizing diaspora remittances and stronger collaboration with BDCs which control the retail end of the forex market.

CEO of Moniepoint, Tosin Eniolorunda, said the CBN’s decision to float the naira is a clear step in the right direction for our economy, ensuring investor confidence continues to grow.

“The decision is good for business, jobs and growth. It will help Nigeria’s brilliant entrepreneurs to do business globally and attract foreign investment. It will also help reduce inflation, leaving more money in people’s pockets,” he said.