The Nigerian naira experienced a marginal uptick against the United States dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on Tuesday, closing at N1,542.58/$, according to data from the FMDQ Securities Exchange.
This represents a 2.9 percent appreciation from the previous day’s trading. However, despite this slight gain, concerns over market volatility persist.
“Banks’ sale of approximately $172 million on Wednesday represents about a 47 percent increase from the previous day,” said an official source, highlighting the growing activity in the forex market.
While banks dominate forex transactions on the FMDQ platform, the Central Bank of Nigeria and multinational corporations, particularly oil firms, also play significant roles.
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The widening gap between the official and parallel market rates is causing anxiety among analysts and Bureau De Change operators. “Today’s rate was at N1,900. We bought at N1,900/dollar and sold around N1,850 and N1,870. Some people say the rate may hit N2,000 by next week or before then,” stated Abubakar Yahu, a BDC operator in Wuse, Abuja.
The government’s efforts, including interventions by the Economic and Financial Crimes Commission (EFCC) and the Central Bank of Nigeria (CBN), aim to stabilize the exchange rate and boost forex liquidity. However, challenges persist, with concerns over currency speculation and illicit financial activities.
President Bola Tinubu’s administration has been seeking to raise at least $10 billion to bolster forex liquidity. Recent CBN directives, such as stopping banks from paying Personal Travel Allowance in dollars and regulating the repatriation of revenue by International Oil Companies, underscore efforts to manage forex demand and supply.
Despite these interventions, the forex market remains volatile, with the naira fluctuating at both official and parallel markets. Analysts have raised concerns over transparency and disclosure in the forex market, urging for more accountability and independence, particularly in platforms like the FMDQ Exchange.
“The wide gap between the intra-day trading rates of dollars at the official market indicates an abnormal situation driven by poor forex supply,” noted Charles Sanni, CEO of Cowry Treasurers Limited. Efforts to obtain comments from the CBN regarding these developments were unsuccessful.
While the CBN’s actions aim to address the challenges in the forex market, stakeholders emphasize the need for a coordinated effort to ensure stability and transparency in forex transactions. Despite the ongoing efforts, the market continues to grapple with uncertainties, signaling the necessity for sustained measures to achieve lasting stability.