August 15, (THEWILL) – The Investors’ and Exporters’ (I&E) window of the forex market recorded a total daily turnover of $1.6 billion between July 15 and August 14, 2023 marking the second month of floating the naira.
The local currency assumed a floating status following the new operational measures for the forex market announced by the Central Bank of Nigeria (CBN) on June 14, 2023 which abolished the multiple forex rates that had existed prior.
The $1.6 billion turnover represents a 33 percent drop from the $2.5 billion the forex market recorded at the I&E window in the first month of the policy (June 14 – July 14, 2023).
Also, the naira appreciated marginally by 2.2 percent in the second month to a total average of N761/$ as against N777/$ in the first month. Both months recorded 21 trading days each.
This implies that the naira suffered a depreciation of 61.4 percent compared to N461.67/$ it traded at the window on June 13 before the introduction of the unified exchange rate.
Daily tracking of the market by THEWILL showed that the highest turnover in the second month occurred on August 11, with $164.60 million when the naira appreciated to one of its highest – N740.60/$. Similarly, the lowest turnover was $34.55 million on July 17, with naira slumping to its lowest of N795.28/$
At the parallel market, the naira exchanged N940/$ on August 14 against N815/$ on July 14 showing a 15.4 percent depreciation. The widening gap between the official and parallel markets has remained the Achilles’ heel of the local currency over time as negative net forex inflow persists due to demand outstripping supply.
A survey conducted by THEWILL in June showed that the majority of Nigerians abroad expressed preference for the parallel market in their home remittance transactions notwithstanding the rate convergence at the time.
Among the reasons for preferring the parallel market include ease of transaction and fear of the Taxman. Some of the respondents explained that using the official window could expose them to “hidden” taxes that could be “financially harmful”. Others opted to adopt a wait-and-see attitude believing that the rate convergence was artificial and temporary.
The acting governor of CBN, Fola Shonubi, recently bemoaned the increasing patronage that the parallel market has been enjoying, warning that the apex bank would sanction financial service institutions found to be involved in forex malpractices.
Shonubi said the CBN would soon flood the forex market with dollars to the detriment of speculators. He did not explain the source of the dollars.
Sam Diala is a Bloomberg Certified Financial Journalist with over a decade of experience in reporting Business and Economy. He is Business Editor at THEWILL Newspaper, and believes that work, not wishes, creates wealth.
