Forex Dealers Reduce Exchange Rate for British Pound Below N2,000
- Big boost for Nigerian currency as foreign reserves continue to rise, giving the CBN more firepower for intervention
- New data released by the CBN shows that reserves are now at their highest level in five years as inflows increase
- The naira closed stronger against the pound, dollar in the last trading session in both the official and black forex markets
Legit.ng journalist Dave Ibemere has over a decade of experience in business journalism, with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The British Pound sterling is now exchanged against the naira below N2,000 in the Nigerian Foreign Exchange Market.
According to the Central Bank of Nigeria, the Pound Sterling closed at N1,976.18/£1 in the official market on Thursday, October 16.
Source: Getty Images
In the parallel market, also known as the black market, traders told Legit.ng that the Pound Sterling sold for N1,990.
For months, the British currency had exchanged for above N2,000 across all forex markets.
Similarly, the naira has improved against the dollar, closing at N1,471.03/$1 on Thursday, which is 0.15% or N2.26 up from the previous rate of N1,473.29/$1.
Why the naira is improving?
Yemi Kale, group chief economist and managing director of Afreximbank, speaking at a recent event, explained that the strong performance of the naira is due to the reforms of the CBN.
Kale explained that, in practical terms, Nigeria is no longer compelled to sell scarce foreign exchange at subsidised rates, BusinessDay reports.
Exporters have also been freed from the penalties of an overvalued currency, creating a healthier environment for trade and investment.
He said:
"The introduction of a more flexible exchange rate regime acts as a natural shock absorber, allowing the currency to adjust gradually to fluctuations in oil prices or global economic conditions, rather than triggering sudden crises in the balance of payments."
Source: Getty Images
FX reserves on the rise
Investors have responded positively to these reforms, as reflected in rising foreign exchange reserves.
Mohammed Abdullahi, the CBN deputy governor in charge of economic policy, announced that the nation’s foreign exchange (FX) reserves have risen to a five-year peak of $43.4 billion.
Abdullahi disclosed during the Nigeria Investors Forum in Washington, D.C., United States, held on the sidelines of the IMF World Bank Annual Meetings, where he led discussions on Nigeria’s economic outlook and reform achievement, TheCable reports.
He noted that the reserves, which reached the milestone on October 10, despite the settlement of FX backlogs, are sufficient to cover 11 months of imports.
Abdullahi stated:
“Our gross reserves have climbed to a five-year high of $43.4 billion as of October 10, providing 11 months of import cover."
CBN slashes customs duty rate
In a related development, the CBN has reduced the customs duty rate, effectively making the cost of importing goods less expensive.
According to data from Nigeria's trade portal, the CBN slashed the exchange rate for clearing goods to N1,546.86 per dollar.
The apex bank noted that the rate remains valid until the date of termination of the importation and clearance of goods by the importer.
Source: Legit.ng
