As Naira depreciates to N530/$1 in parallel market
By Elizabeth Adegbesan
The volume of dollars traded (turnover) in the Investors and Exporters (I&E) window of the Nigerian foreign exchange market rose by 17 percent, month-on-month, to $3.22 billion in August from $2.75 billion in July 2021.
Vanguard analysis of weekly turnover in the window showed that $693.5 million was traded in the first week of August.
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Turnover rose by 2.0 per cent to $681.02 million in the second week but went down by 30 per cent to $479.12 million in the third week, before reverting to uptrend in the fourth week when turnover massively by 66 per cent to $795.12 million.
Turnover stood at $568.12 million in the last two days of August hinting to a further surge week-on-week.
Meanwhile, the Naira appreciated by 42 kobo during the period as the indicative exchange rate of the window fell to N411.08 kobo per dollar on August 31st from N411.50 per dollar on August 1st.
However, the naira depreciated by N10 in the parallel market.
Financial Vanguard findings from naijabdcs.com, an online foreign exchange data portal, showed that the indicative exchange rate rose to N525 per dollar on August 31st from N515 per dollar on August 1st, 2021.
Further into September, the value of Naira deteriorated to N530/$1 as at close of business last weekend.
According to Lukman Otunuga, a Research Analyst at FXTM, the Naira remained under pressure on the parallel markets despite the Central Bank of Nigeria’s efforts to block unauthorized transactions.
He noted: “The local currency also weakened against the British Pound and Euro. Despite the CBN increasing the supply of dollars to banks and banning the sales of the currency to traders, scarcity remains a cause for concern.
“Since March last year, the Naira has been devalued three times as lower oil revenues hit external reserves. With the Naira on a slippery decline on the black-market exchange and widening versus the official rate, this certainly does not bode well for businesses that need dollars”, he said.
Analysts at FSDH Research Management had projected further forex pressure in the third quarter citing limited inflows from crude and non-oil sources coupled with rising imports.
“In the second quarter of 2021, the Naira was fairly stable in the I&E window, relative to the previous quarter. The Naira closed the quarter at N411.5/US$, having opened the quarter at N409.3. This relative stability in the I&E window was reflected in the performance of external reserves which was severely pressured in the quarter. Reserves lost 4.4 percent of its value in the quarter.
In the parallel market, the Naira depreciated, reaching N500 per dollar due to forex scarcity and speculative activities, following the CBN’s adoption of NAFEX rate in May. “Consequently, the gap between the NAFEX rate and the parallel market expanded in the quarter.
We expect forex pressure to continue into the third quarter owing to limited inflows from both crude and non-oil sources and rising imports.”
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