…CBN Struggles to Stabilize Forex Market
The Nigerian naira experienced a decline to N1,400 against the US dollar on the black market due to increased demand pressure in the foreign exchange (FX) market.
This marks a significant drop from N1,125 per dollar recorded on April 12, 2023, reflecting a 19.64 percent decrease within two weeks.
Data from the FMDQ Securities Exchange reveals a depreciation to N1,308.52 per dollar on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM). Compared to the rate on April 12, 2024, the naira has weakened by 12.69 percent.
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Foreign portfolio investors (FPIs) have been affected by the lack of hedge options amidst the ongoing Israel-Hamas conflict and a strengthening dollar. With no Non-Deliverable Forwards (NDFs) or Exchange Traded Derivatives (ETDs) available, investors are exposed to market volatility.
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The Central Bank of Nigeria (CBN) recently allocated $15.83 million to 1,583 Bureau De Change (BDC) operators to stabilize the FX market. Each BDC received $10,000 at a rate of N1,021 per US dollar. This initiative aims to enhance accessibility to foreign currency for eligible end-users.
BDCs are required to sell the allocated foreign currency to end-users with a spread not exceeding 1.5 percent above the purchase price, ensuring fairness and transparency in the market. Hassan Mahmud, Director of the Trade and Exchange Department at the CBN, emphasized the importance of adherence to operational guidelines.
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The CBN’s intervention is part of ongoing efforts to promote stability and transparency in the FX market, facilitating international trade and investment opportunities in Nigeria.
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