“No More N1,500/$:” Naira Recovers in Official, Black Markets as CBN Threatens Banks

“No More N1,500/$:” Naira Recovers in Official, Black Markets as CBN Threatens Banks

  • The naira rebounded in the official and parallel markets following CBN directives to banks to offload excess forex in their possession
  • The naira traded at N1,461.90 in the official market and N1,400 in the parallel market
  • The development came as the FMDQ exchange reportedly changed the methodology used to calculate Nigeria's forex

Pascal Oparada has over a decade of experience covering Tech, Energy, Stocks, Investments, and Economy.

Following the February 1, 2024, deadline given to commercial banks by the Central Bank of Nigeria to sell all excess foreign exchange holdings, banks on Thursday, February 1, 2024, have made efforts to sell their surplus dollar stocks.

Reports say the banks' treasury departments spent the day battling to sell their excess dollar holdings, with officials processing numerous forex request forms of their customers as they sold more dollars.

Read also

CBN removes limits on FX transactions between Access, Zenith, UBA, others

Naira recovers, CBN, Black market
The naira rebounds in the official and black markets Credit: Bloomberg/Contributor
Source: Getty Images

CBN orders banks to sell more dollars

The rise in forex sale activities at the official exchange rate market led to the naira's recovery in the black market.

In a circular issued to banks on Wednesday, January 31, 2024, the CBN ordered banks to sell excess dollar stocks by February 1, 2024, warning against hoarding by the banks.

The new circular introduced a set of guidelines to reduce the risks associated with the practice.

The apex bank raised concerns over banks holding sizeable foreign exchange currencies.

The circular partly reads:

"The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks."

Read also

Access, GTB, UBA, Zenith others to pay customers money sent from abroad in naira, give exchange rate

CBN further directed banks with current NOPs above their limits to adjust their positions and comply with the new regulations within the stipulated time.

FMDQ recalculates Nigeria's FX rate

The Punch reports that the circular came 48 hours after the CBN issued a circular warning banks and forex dealers against false reporting exchange rates.

Also, the development follows the readjustment of the methodology used to calculate Nigeria's official exchange rate by FMDQ Exchange, moving the official exchange rate to about N1,500 from around N900 per dollar.

Following CBN's directive to unify the official and parallel market rates, several banks sold forex to their customers on Thursday, February 1, 2024, leading to the sharp rebound of the naira in the official market.

Forex dealers moved to sell their dollar holdings amid fears that the naira will continue gaining ground against the dollar in the coming days.

Read also

Access Bank sends message to customers on savings account changes as CBN is set to release new rates

Naira falls to lowest 24 hours after EFCC, BDC officials meeting

Legit.ng reported that the Nigerian foreign exchange market saw a historic decline in the value of the naira, which reached an unrivalled intraday high of N1,399 per dollar at the official market on Thursday, January 25, 2024.

Data from FMDQ show a significant 6.15% drop compared to the N1,313 rate observed during the intraday trading a day earlier.

Also, the intraday low saw a significant 11.28% drop as the dollar was quoted at N789 on Thursday, January 25, 2023, in contrast to N700 on Wednesday, January 24, 2024.

Source: Legit.ng

Pascal Oparada avatar

Pascal Oparada (Business editor) Pascal Oparada is a Mass Communications Graduate from Yaba College of Technology with over 10 years of experience in journalism. He has worked in reputable media organizations such as Daily Independent, TheNiche newspaper, and the Nigerian Xpress. He is a 2018 PwC Media Excellence Award winner. Email:pascal.oparada@corp.legit.ng

Online view pixel