Tag: Naira

the naira yesterday depreciated to N1,000 to dollar at the parallel market. The sustained scarcity of dollar at both official and parallel markets and activities of forex speculators  were to blame.

The rate was N5 weaker than N995 to dollar it closed on Monday.

The local currency however made marginal recovery at the  official market- the Investors and Exporters (I&E) window. It traded at N755.08 to dollar compared with N773.25 to dollar it closed on Monday.

Report from FMDQ Exchange showed there was $135.98 million turnover on Tuesday, an improvement from $65 million it recorded on Monday.

Former Registrar, Chartered Institute of Bankers of Nigeria (CIBN), Dr. Uju Ogubunka, said Nigeria’s trade balance has been weakened by its inability to produce and earn forex.

To firm up the naira, he said Nigeria must find new ways to boost production to earn more dollars and boost foreign reserves.  Ogubunka, who is also the President, Bank Customers Association of Nigeria, said aside boosting production, there is need to tackle insecurity to allow farmers go to their farms.

He said such effort will help increase crop yields and bring more dollar earnings for the economy that will ,firm up the local currency.

According to him,  insecurity and the political uncertainty are delaying several corporate investment decisions that would have brought in more dollars to the economy.

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President, Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, said there was need to encourage market participants to source forex from independent windows to boost liquidity.

He called for enabling environment and fair treatment for all the players to achieve exchange rate stability.

He advised the Federal Government should enhance financial intelligence by tracking people with proceeds of corruption to sanitize the market.

Gwadabe said many of the people with proceeds from corruption are the ones putting pressure on the forex market through their manipulative actions. “The naira is depreciating not by forces of demand and supply, but by the collective action and impact of the people with illicit funds,” he said.

The naira yesterday crashed to a record low of N980/$ at the parallel market, inching closer to N1,000/$ rate predicted by industry watchers.

The depreciation of the currency was mainly as a result of shrinking dollar supply from the Central Bank of Nigeria (CBN), authorised  dealers (mainly commercial banks) and autonomous market sources.

The currency traded at N965/$ at the parallel market on Tuesday but was relatively stable at the official market where it exchanged at N776.60/$, data from the FMDQ Exchange showed.

A BDC operator in Lagos, Tamiu Abiodun, said the naira would continue to fall, unless there is urgent policy change that increases dollar liquidity.

“It is a matter of demand and supply. The demand for dollar keeps rising everyday, without commiserate supply from authorised dealers or the CBN,” he said.

The naira fall continued despite uptick in crude oil prices. Brent is trading at $95 after the Energy Information Administration (EIA) forecasts tighter markets on slimmer OPEC+ output. At $95, Brent has climbed to its highest level in 10 months.

Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said oil prices could soften following rise in the U.S. inflation rate to 3.7 per cent.

President, Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, advised the Federal Government to enhance financial intelligence by tracking people with proceeds of corruption to sanitise the market.

He said many of the people with proceeds from corruption were putting pressure on the forex market through their manipulative actions.

“The naira is depreciating not by forces of demand and supply, but by the collective action and impact of the people with illicit funds,” he said.

Read Also: $2.5b backlog, rising dollar demand hurting naira, says report

Former Executive Director, Keystone Bank Limited, Richard Obire said the weakness of the naira over time had been caused by two issues linked to the quality of leadership and governance.

He said the heavy and skewed outward-oriented consumption of goods and services as seen in decades of long substantial bills for food and energy imports remained a hindrance to naira stability.

Also, the corruption-driven capital outflows, which in turn, damaged Nigeria’s capacity to produce at a scale that would enable the country to fully engage its large population to create widespread prosperity works against the naira.

On ways to strengthen the naira, he advised that in the short-term, there was the need to find non-market damaging ways to increase the supply of hard currencies and reducing the demand for same.

He said insecurity hampering food production needs to be tackled with a sense of urgency and effectiveness.

“Priority should be given through deploying pragmatic incentive programs to drive up the volume of food products for domestic consumption and industrial use to reduce our food import bill. All government consumption expenditures requiring the use of hard currencies should be suspended indefinitely, starting now,” he advised.

Continuing, Obire said the Turn Around Maintenance (TAM) status of refineries in Port Harcourt and Warri should be appraised immediately. Effort should be focused on the one which can begin producing quicker. The other one should be made to be up and running, not long after. This should reduce required forex for fuel imports.

“In the long term, only a strong economy will produce a stable currency. To achieve this will require addressing the fundamental structural defects in our political-economy hampering an accelerated transition from an outward consumption oriented economy into a mainly balanced production driven one,” he said.

The naira has recorded massive loss at the parallel market, closing the week at N960 per dollar, the weakest rate since June when the Central Bank of Nigeria(CBN) unified the multiple foreign exchange rates.

The local currency depreciation has been attributed to persistent dollar scarcity and activities of speculators who are putting excessive premium on the naira.

The depreciation continued despite the CBN’s promise that forex backlog estimated at $10 billion would be cleared.

The uptick in crude oil prices have also not helped naira to recover at the official market.

Oil prices hit a 10-month high owing to supply cuts by Russia and Saudi Arabia, which Brent crude price rising  to $93pb for the first time since last November.

Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said Saudi Arabia would further extend supply cuts to December, adding that Brent prices are expected to rise to $95pb by year-end.

Rewane added that global crude oil supplies were expected to improve on refinery maintenance.

On forex backlog clearance, the acting CBN boss Shonubi said last Monday that the apex bank was working with commercial banks to clear the forex backlog through various structures within the forex market.

Shonubi said the banks, which controls 75 per cent of the forex transactions, would play significant role in seeing that the backlogs go.

The backlogs, estimated at $10 billion,  constitute of dollar requests from manufacturers who want to purchase raw material inputs from abroad, parents paying their children’s tuition fees abroad, Nigerians paying medical bills abroad, travellers sourcing Business Travel Allowances (BTAs), and Personal Travel Allowances (PTA), among others.

Analysis of data on the FMDQ website showed a $160 million transaction volume on Friday, a major leap from around $60million to $80 million average daily turnover recorded previously.

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But shift of the forex demand pressure to the parallel market pushed the local currency to N920/$, creating N198 rate gap between the official and parallel market rates.

The gap showed that initial convergence of the exchange rate after the announcement of FX market reforms has disappeared.

Former Executive Director, Keystone Bank Limited, Richard Obire said the weakness of the naira over time has been caused by two broad issues linked to the quality of leadership and governance.

He said Nigeria’s heavy and skewed outward-oriented  consumption of goods and services as seen in decades of long substantial bills for food and energy imports remains a hindrance to naira stability.

Also, the massive corruption-driven capital outflows which in turn severely damages Nigeria’s capacity to produce at scale that will enable the country to fully engage its large population to create widespread prosperity works against the naira.

On ways to strengthen the naira, he advised that in the short-term, there is  need to find non-market damaging  ways to increase the supply of hard currencies and reducing the demand for same.

“Our crude oil export quota is 1.74 million barrels per day. In July, we produced 1.081m bpd. Let us get our production up to the full quota. At current market price of about $87 per barrel, this should see us earning an additional about $1.7 billion per month. Nigerian Diaspora Remittances rather than declining should be growing as the population of our Diasporans are growing. Half-year January to June 2023, remittances totaled $952  million compared to $1.21 billion for the same period in 2022,” he said.

According to Obire, right pricing for remittances and frictionless processes for their use by  recipients  should see the volumes growing again.

He said insecurity hampering food production needs to be tackled with a sense of urgency and effectiveness.

“Priority should be given through deploying pragmatic incentive programs to drive  up the volume of food products for domestic consumption and industrial use to reduce our food import bill. All government consumption expenditures requiring the use of hard currencies should be suspended indefinitely, starting now,” he advised.

Continuing, Obire said the Turn Around Maintenance  (TAM) status of refineries in Port Harcourt and Warri should be appraised immediately. Effort should be focused on the one which can begin producing quicker. The other one should be made to be up and running, not long after.This should reduce required forex for fuel imports.

“In the long term, only a strong economy will produce  a stable currency. To achieve this will require addressing the fundamental structural defects in our political-economy hampering an accelerated transition from an outward consumption oriented economy into a mainly balanced  production driven one,” he said.

The naira yesterday depreciated at both official and parallel markets, where it exchanged at N780/$ and N950/$ respectively.

The local currency had closed at N758/$ at the Investors and Exporters (I&E) window and N940/$ at the parallel market on Wednesday.

The naira fall continued despite uptick in crude oil prices. Brent gained 1.38 per cent to $93.15bp after the Energy Information Administration (EIA) forecasts tighter markets on slimmer OPEC+ output.

At $93pb, Brent has climbed to its highest level in 10 months. The EIA is forecasting that the price of Brent crude will average $92.68pb in fourth quarter, and $91pb by first quarter of 2024.

However, Managing Director, Financial Derivatives Company Limited, Bismarck Rewane,  said oil prices could soften, as a rise in the US inflation rate to 3.7 per cent may prompt the US Fed to hike interest rates further at their next meeting on September 19 and 20.

The naira rates also created N170/$ margin between the official and parallel market rates. The rates has continued to crash despite  promise by the Central Bank of Nigeria (CBN) Acting Governor, Folashodun Shonubi,  to clear estimated $10 billion backlog in two weeks.

• Exchanges at N758/$ at official market

The naira yesterday relapsed to a record low of N940/$ at the parallel market as demand pressures continued to confront declining dollar supply.

However, at the Investors and Exporters ((I&E) window, the local currency closed at N758/$, creating a N182 gap between the official and parallel market rates.

The current naira depreciation happening at a period of crude oil prices spike surprised many market analysts and forex dealers.

Crude oil prices yesterday reached $98.19 per barrel data from the Central Bank of Nigeria (CBN) website showed.

The surge in crude oil prices was due to supply disruptions in Libya and expectations of further U.S inventory draw.

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The rate also represents the widest market between both rates since the  Central Bank of Nigeria (CBN) Acting Governor, Folashodun Shonubi, announced plan to clear estimated $10 billion backlog in two weeks.

The uptick in crude oil prices analysts said should help naira recovery at the official and parallel markets.

Oil prices hit a 10-month high owing to supply cuts by Russia and Saudi Arabia.

Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said Saudi Arabia will further extend supply cuts to December adding that Brent prices are expected to rise to further before year end.

Rewane added that global crude oil supplies expected to improve on refinery maintenance.

On forex backlog clearance, the CBN boss Shonubi said the apex bank is working with commercial banks to clear the forex backlog through different structures within the forex market.

Shonubi said the banks, which controls 75 per cent of the forex transactions will play significant role in seeing that the backlogs go.

The naira opened yesterday on a negative note dropping by about 7.1 per cent at the formal market.

The naira closed at N773.50 per dollar at the Investors and Exporters (I & E) window, as against N736.62 recorded in the previous session. The open indicative rate closed at N771.49 per dollar yesterday.

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A spot exchange rate of N804.15 per dollar was the highest rate recorded within the day’s trading before it settled at N773.50.

The naira also traded at a low of N722.39 per dollar with turnover at $37.86 million.