Naira weakens at black market as external reserves loses $42 million in 1 week

Nigeria’s exchange rate at the NAFEX window remained stable against the dollar to close at N386/$1 during intraday trading on Tuesday, October 13.

Also, the naira depreciated marginally against the dollar, closing at N461/$1 at the parallel market on Tuesday, October 13, 2020, as the external reserve drops by $42 million in 1 week.Parallel market: According to information from Abokifx, a prominent FX tracking website, at the black market where forex is traded unofficially, the Naira depreciated against the dollar to close at N461/$1 on Tuesday. This represents a N1 drop when compared with the N460 that it exchanged for on Monday, October 12.

Current developments
The local currency has strengthened by about 7.8% within the last one week at the black market, as the CBN introduced some measures targeted at exporters and importers, in order to try to boost the supply of dollars in the foreign exchange market, and reduce the high demand for forex by traders.
The CBN has sold over $450 million to BDCs since they resumed forex sales on Monday, September 7, 2020. This was expected to inject more liquidity to the retail end of the foreign exchange market and discourage hoarding and speculation.
However, the exchange rate against the dollar has failed to sustain the initial gains made, after the CBN announced plans to provide liquidity.
BDC operators have urged the apex bank to reconsider the margin allowed for the currency traders, as it was inadequate to meet their expenses.
We also noted that forex traders monitored during the previous week, appeared to hoard forex, as they anticipated further depreciation in the market.
There has been a drop in speculative buying of foreign exchange, although demand backlog by manufacturers and foreign investors still puts pressure, and creates a volatile situation in the foreign exchange market.

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