In a dynamic twist of events, the Nigerian Autonomous Foreign Exchange Market witnessed a surge in foreign exchange transactions, reaching $584 million, marking a significant leap from the preceding daily transaction of $440 million.
This surge coincided with the national currency’s retreat against the US dollar, closing at N1,433 per dollar, in contrast to Monday’s N1,419 per dollar.
The spike in liquidity follows strategic interventions by the Central Bank of Nigeria (CBN) aimed at stabilizing the foreign exchange landscape. Beyond commercial banks, entities such as the CBN, oil firms, and multinationals have contributed to this surge by participating in dollar sales within the market.
READ ALSO: Naira Rebounds At Official Forex Window To N1,419/$, Despite Lingering Parallel Market Concerns
Last week, the CBN issued new directives and guidelines geared towards enhancing liquidity and narrowing the gap between parallel and official exchange rates.
Notably, the CBN’s mandate to banks to adjust their foreign exchange exposures underscores its commitment to managing risks associated with large foreign currency positions held by banks.
Under the directive titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” banks are required to ensure that their Net Open Positions (NOP) do not exceed 20 percent short or 0 percent long of the bank’s shareholders’ funds. Failure to comply by the February 1 deadline will incur repercussions.
The response to these adjustments was evident as the naira gained ground thrice at the official market in the previous week, showcasing resilience amidst evolving regulatory measures. However, post-Tuesday trading saw a marginal depreciation of 0.85 percent, with the dollar quoted at N1,433.89 compared to Monday’s N1,421.70 at the Nigerian Autonomous Foreign Exchange Market.
Conversely, Bureau De Change operators noted varying rates at the parallel market, with fluctuations ranging between N1,480 and N1,485 per dollar. Despite the challenges posed by exorbitant prices, economic analysts remain optimistic about the naira’s potential to strengthen across both markets shortly.
As the foreign exchange landscape continues to evolve, stakeholders navigate through shifting tides, anticipating both challenges and opportunities in the pursuit of exchange rate stability and economic resilience.