Exchange Rate Falls to Lowest Ever, Hits N2060/£1, N1700/$1 as CBN Orders Bank, Others to release FX
- The Nigerian exchange rate has worsened again on Monday, February 19, compared to the previous day
- The unofficial market saw the Nigerian naira reach its lowest in history against the major currencies of the world
- The decline persists despite the recent move by the CBN, which compelled banks and other institutions to release excess dollars
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Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.
The Nigerian naira's exchange rate has worsened against the dollar and Great Britain's pound.
Source: Getty Images
Findings by Legit.ng showed that the naira to pound was trading at N2,060/£1 on Monday, February 19, 2024.
This was against the N1995/£1 it closed the previous trading day, representing a 3.26% decline.
Similarly, the naira to dollar fell as some traders in the street sold for N1,700/$.
Earlier, Bloomberg reported that the naira slumped 1.8% to N1,645 to the dollar on Friday in street trading. This represented a 3.34% decline in value.
CBN moves to ensure dollar availability
Punch reported that despite increased dollar availability, trading operations over the course of eleven days through the Nigerian Autonomous Foreign Exchange Market (NAFEM) by Deposit Money Banks resulted in a total transaction volume of $3.83 billion.
Data between February 2 and February 15 from FMDQ securities currency, a platform that reports on official foreign currency trading in the nation, indicated an increase in FX transactions.
The principal forex sellers at NAFEM include commercial banks, the Central Bank of Nigeria, and foreign oil companies.
The CBN ordered banks to sell their surplus dollar stock and provide liquidity in the foreign exchange market, which bolstered liquidity in NAFEM.
The FX prudential guidelines ordered banks not to exceed a new threshold. According to the FMDQ data, banks caused others to sell $1.97 billion during the first week of the CBN circular.
A prior circular issued by the CBN directed Deposit Money Banks to divest their surplus dollar stock due to the increasing trend of banks maintaining substantial foreign currency positions. Lenders were cautioned not to stockpile surplus foreign currency for financial benefit.
The apex bank released another set of guidelines that stopped banks from paying Personal Travel Allowance to their customers in cash.
In a recent circular, it further requested that international oil businesses refrain from immediately repatriating all of their earnings to their parent businesses.
The apex banks also reexamined their policies to prevent under- and over-invoicing of imports and exports.
Samuel Oyekanmi opined that ensuring liquidity in the system would help to solve the challenges of FX in the country.
He said,
"What will be great is to ensure improved liquidity in the official market, bridging the arbitrage caused by the disparity between the official and the parallel market, and nip the impact of FX shocks on prices in the bud."
Expert speaks on naira to dollar exchange rate
Legit.ng earlier reported that the Nigerian currency depreciated against the US dollar in the official foreign exchange (FX) market after two sessions of positive performance.
Data from FMDQ securities showed that the naira closed against the US dollar at N1,433.89/$1 on Tuesday, February 7, 2023, at the NAFEM.
This represented a 0.99% or N14.03 loss compared to Monday's exchange rate of N1,419.86/$1.
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Source: Legit.ng
