Naira hit a new fall in August

Naira hit a new fall in August

 

 

 

Nigeria’s currency has lost about 2.23 per cent of its value against the dollar in almost one month due to a persistent rise in demand for the greenback at the parallel foreign exchange (FX) market segment.

According to analysts, the continued loss in the value of the Naira followed the scarcity of dollars occasioned by low inflows from oil receipts, foreign capital and Diaspora remittances, among others.

 

Consequently, the external reserves, which give the Central Bank of Nigeria (CBN) the firepower to defend the Naira, have steadily declined. Data gathered from Abokifx and street traders show that one dollar traded at N915/$1 during the intraday trading on Monday, compared to N895/$1 sold early week of the month (on August 5 2023).

The demand for dollars mainly was from importers who could not access foreign exchange from the official segment and individuals who wanted to travel for business, tourism, medical or school.

 

“There are enough dollars in the market, but demand is high”, said Abubakar, one of the street traders in Lagos.

On August 18, 2023, the CBN released a new operational guideline for the sale of forex by Bureau De Change (BDC) operators. According to the new guideline, the spread on buying and selling by BDC operators shall be within an allowable limit of -2.5 per cent to +2.5 per cent of the Nigerian foreign exchange market window weighted average rate of the previous day.

 

“The -2.5 to +2.5 per cent is the spread the BDCs are allowed to make in buying and selling on their rates. The anchor rate to calculate the distance is the closing average weighted rates in the I&E window of the previous day on the following day, said Aminu Gwadabe, national president of the Association of Bureau De Change Operators of Nigeria (ABCON).

 

Nigeria’s currency has experienced a decline of approximately 2.23 percent against the US dollar over the span of nearly one month. This drop is attributed to a sustained surge in demand for the dollar within the parallel foreign exchange (FX) market sector.

 

Analysts suggest that the ongoing devaluation of the Naira can be attributed to the shortage of dollar inflows, stemming from factors such as reduced oil receipts, limited foreign capital, and decreased remittances from the Diaspora.

 

Consequently, the country’s external reserves, which serve as the Central Bank of Nigeria’s (CBN) ammunition for safeguarding the Naira’s value, have been steadily diminishing.

Based on data sourced from both Abokifx and street vendors, it is noted that during intraday trading on Monday, the exchange rate was N915/$1.

This is in comparison to the rate of N895/$1 observed at the beginning of the month (August 5, 2023).

 

The heightened demand for dollars primarily originates from importers who are unable to access foreign exchange through official channels, as well as individuals intending to travel for purposes like business, tourism, medical treatment, or education.

“There is an ample supply of dollars in the market, but the demand is outstripping it,” commented Abubakar, one of the street vendors in Lagos.

 

In a move made on August 18, 2023, the CBN introduced a fresh operational guideline pertaining to the sale of foreign exchange by Bureau De Change (BDC) operators.

 

Under this new directive, the permissible spread for buying and selling by BDC operators is set within a range of -2.5 percent to +2.5 percent of the previous day’s weighted average rate in the Nigerian foreign exchange market window.

 

Aminu Gwadabe, the national president of the Association of Bureau De Change Operators of Nigeria (ABCON), clarified, “The range of -2.5 to +2.5 percent denotes the allowable profit margin for BDCs in their buying and selling operations.

 

The reference rate for calculating this range is the closing average weighted rate within the Importers’ and Exporters’ (I&E) window on the previous day.

 

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