On Wednesday, the Naira saw a slight increase in value against the US dollar, rising to N1,609 from the previous day’s rate of N1,615.94 at the official market. This represents a marginal increase of N6 or 0.37 percent. This uptick follows a string of foreign exchange directives issued by the Central Bank of Nigeria in recent weeks.
On Wednesday, the Naira saw a slight increase in value against the US dollar, rising to N1,609 from the previous day’s rate of N1,615.94 at the official market. This represents a marginal increase of N6 or 0.37 percent. This uptick follows a string of foreign exchange directives issued by the Central Bank of Nigeria in recent weeks.Meanwhile, on Tuesday, the Monetary Policy Committee raised the benchmark interest rate, known as the Monetary Policy Rate, by 400 basis points to 22.75 percent. This marks an increase from the previous rate of 18.75 percent set in July 2023.
The Monetary Policy Committee also made adjustments to the asymmetric corridor surrounding the Monetary Policy Rate, widening it to +100/-700 basis points from +100/-300 basis points. Additionally, they increased the Cash Reserve Ratio from 32.5 percent to 45.0 percent, while maintaining the Liquidity Ratio at 30 percent.
Despite these changes, the expected effects of the rate hike have not yet been observed in the official foreign exchange market. According to data from the FMDQ Securities Exchange, the Naira depreciated by 2.04 percent, with the dollar being quoted at N1,615.94 on Tuesday, compared to N1,582.94 on Monday at the Nigerian Autonomous Foreign Exchange Market.
Government officials have consistently asserted that the current value of the Naira is undervalued.
Data sourced from FMDQ indicated that on Tuesday, the Naira fell to N1,615.94 against the dollar, compared to N1,582.94 on Monday, marking a depreciation of N30 or 2.0 percent from the closing rate of N1,582.94 the previous day.
In spot trading on Wednesday, the intraday high dropped to N1,660 from N1,778 per dollar on Tuesday and N1,805 per dollar on Monday. However, the intraday low saw a slight increase to N1,401 from N1,300 on Tuesday and N1,301 per dollar on Monday.
Nevertheless, the daily turnover in the foreign exchange market declined further to $119.14 million, down from $154.16 million on Tuesday and $166.58 million on Monday.
According to information obtained from currency dealers, there was no fixed price for selling dollars at the parallel market.
Malam Ibrahim, a BDC operator, explained that the exchange rates fluctuated frequently throughout the trading day, changing at least seven times before the market closed.
“Currently, nobody can tell you the actual price because you can get up to seven different prices in a day and within minutes. The naira is just a pendulum right now, up and down.”
“We are looking for buyers but majority of our customers are looking for dollar to sell and there is no buyer. So that is the problem,” he said.
Throughout Wednesday, the Naira fluctuated between N1,300, N1,450, and N1,500 on the black market, in contrast to the N1,550 rate observed on Tuesday.
Confirming this situation, another BDC operator noted that ongoing raids by security forces have dampened trading activity.
However, as of 9 p.m. on Wednesday, BDC operators had yet to receive the dollar allocations promised by the CBN.
While the reason for this delay remains unknown, more than 1,300 BDCs have been earmarked for allocation by the CBN.
In a circular issued on Tuesday, the CBN pledged to provide each BDC with $20,000 at an exchange rate of N1,301 per dollar.
These BDCs are permitted to sell to end-users at a margin not exceeding one percent above the purchase rate from the CBN.
