Naira Weakens at the Official Market as Commercial Banks Sell $584 Million

The value of foreign exchange transactions recorded on the official Nigerian According to the FMDQ Exchange data for Tuesday, the value of foreign exchange transactions that were recorded on the official Nigerian Autonomous Foreign Exchange Market increased to $584 million. The rise shows a significant increase from the Monday daily transaction of $440 million.

On Tuesday, the naira weakened against the dollar at the official market. It closed at N1433/$, compared to N1419/$ recorded on Monday.

According to the data released by the FMDQ Security Exchange, FX turnover rose to $584.53 million on Tuesday from $440.13 million recorded on Monday, which shows an increase of $144.4 million, or 32.8%.

The improved liquidity follows moves by the Central Bank of Nigeria to stabilise the foreign exchange rate.

Aside from commercial banks, the Central Bank of Nigeria, oil firms, and multinationals also sell dollars at the Nigerian Autonomous Foreign Exchange Market.

Last week, the Central Bank of Nigeria released new circulars and guidelines to boost liquidity and narrow the gap between the parallel and official rates of the foreign exchange market. The CBN ordered banks to adjust their FX exposures in its most significant foreign exchange guidelines the same week.

The circular is titled "Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks," and the Apex Bank expressed dismay following the increase in commercial banks hoarding the dollar.

The circular partly reads,

• The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position. This has incentivised banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.

The CBN instructed local banks' NOPs not to exceed 20% short or 0% long of the bank's shareholders' funds in the future. The apex bank gave the February 1, 2024, deadline to those who had exceeded its limit.

Following the modification, the national currency improved significantly in the official market following the adjustments.

The naira closed at N1,455.59/$ on Wednesday, N1,445/$ on Thursday, and N1435.53/$ on Friday last week.

After trading on Tuesday, the naira depreciated marginally by 0.85% as the dollar was quoted at N1,433.89, stronger than N1,421.70 quoted on Monday at the NAFEM market.