Forex: Naira falls on official I&E window to N1089/$
NIGERIA, Jan. 10 – The Naira fell on the official Investor and Exporter window to N1089.51/$ on Tuesday.
The currency dropped from N856.57/$ representing 27.19% it closed on Monday, following the data obtained from the FMDQ Securities Exchange.
Opening trading on Tuesday, the naira started from N922.22/$, grew to a high of N1251/$ and low of N720/$ before closing at N1089.51/$.
The volume of forex turnover on the day was $97.45m.
Remarkably, this is the fourth time the naira will close below N1,000/$ on the official window.
Biztv24 recall that on December 8, 2023, the naira fell to an all-time low of N1,099.05/$, while on December 28, 2023, it closed trading at N1043.09/$, however, on January 3, 2024, the Nigeria currency closed at N1035.12/$.
It’s important to note that Tuesday’s N1089.51/$ is the second lowest the Nigeria currency has closed on the official forex window since the Central Bank of Nigeria removed the rate cap of the currency.
The currency’s steady decline is despite the CBN’s steps to clear backlogs of matured foreign exchange obligations to the Deposit Money Banks. Recently, the apex Bank stated that it has paid $2bn as part of its backlog obligations.
Reports available in the media estimate that the bank is owing $7bn as forward contract obligations. The CBN disclosed this when it revealed it has disbursed $61.64m to foreign airlines as part of matured foreign exchange owed to them.
The CBN Acting Director of Corporate Communications, Hakama Alia, said, “These payments signify the CBN’s ongoing efforts to settle all remaining valid forward transactions, to alleviate the current pressure on the country’s exchange rate.
“It is anticipated that this initiative by the CBN should provide a considerable boost to the Naira hug against other major world currencies and further increase investor confidence in the Nigeria economy.”
Besides, this present decline of the naira against the dollar is in the face of the government’s renewed effort to increase liquidity in the forex market.
In December 2023, the Minister of Finance and Coordinating Minister of Economy, Wale Edun made it known that the Federal Government had received a $2.25bn foreign exchange support facility from the African Import-Export Bank.
According to the statement by minister, the first tranche of its $3.3bn facility from the bank is targeted at resolving forex shortages in the economy.
Reacting on the issue, the Chief Executive Officer, Economic Associates, Dr Ayo Teriba, stated that the volatility of the naira is because of inadequate foreign exchange supply.
He said, “Reserves are low and declining, the CBN is known to be in arrears on some of its obligations. It has started clearing its arrears and has pledged to clear all of it in due course.”
He noted that the federal government has been taking steps to increase forex supply through investments, but these are yet to come to realization.
He stated, “I am optimistic that if the government can walk their thought about opening to investors, we would get the forex to boost reserves and meet the demand in the FX market, and the naira would stabilise. I want to see the N1000/$ as a reflection of FX shortages. I want to hope that Nigeria will in the next few weeks take the right steps.
“We were to take the NNPC to the market last year, but it didn’t happen. These are things we can fast-track. Nigeria has options.”
Teriba emphasized that the present inflow of $2.3bn as crude forwards is not enough to solve Nigeria’s forex supply challenges.
He added, “We need to put down enough access to attract foreign exchange inflows. The naira will stabilize, inflation will come down, growth will pick up, and the living standard will improve. If we do not act, the volatility will continue, and this will be a bottomless pit. We need to build a wall of reserves so that the FX market will improve.”
Nigeria’s economic projections for the year 2024 may likely be hindered or even get worse if the problem of FX is not resolved. The country is more of a consuming than a producing economy.