Naira strengthens despite N83.83 gap between I&E window, unofficial market

February 8, 2021
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DESPITE about N83.83 gap between the unofficial market and the Investors and Exporters (I&E) exchange rate windows, Naira strengthened against the U.S dollar at the I&E window of the foreign exchange market last week (Wednesday) data posted on the FMDQ Security Exchange market where currencies are officially traded showed.

Naira closed at N396.17/$ at the Friday trading session, representing N1.46 or 0.37 per cent gain from N397.63, the rate at which it closed at the previous session on Thursday.

The local unit appreciated against the greenback currency as turnover rose by 102.89 per cent, with $96.82 million recorded as against the $47.72 million posted on Thursday.

It experienced an intraday high of N381.50 and a low of N401.00 before closing at N396.17 on the spot market (I&E window)

Meanwhile, data posted on abokiFX.com, the unofficial market in Lagos where naira is traded, showed the domestic currency (naira) closed at N480 to a dollar. The same rate it stood since the beginning of the week.

This leaves a spread of N83.83 between the unofficial market and the I&E window exchange rates, which translates to a gap of 21.16 per cent.

The CBN’s official rate on Friday at the I&E window was still N379 per dollar.

However, despite the efforts by the CBN to increase liquidity in the foreign exchange market through its new policy on diaspora remittances, reports continue to show that there has been a lot of pressure on the foreign exchange market, thereby leading to a decline in the availability of foreign currency.

Currency experts say one factor that could be responsible for this, is that many International Money Transfer Operators (IMTOs) and unlicensed operators are still remitting money sent from the diaspora to Nigerians in Naira. Also, many of the operators are hoarding dollars, thereby leading to scarcity of foreign currency in circulation.

The Nigerian naira gained on the spot market even after the CBN ordered Nigerian banks to close all cryptocurrency-related accounts with effect from Friday.

The regulator had prohibited all financial institutions from facilitating crypto currency payments in the country.

In December 2020, the Central Bank of Nigeria issued a series of circulars in furtherance of its new policy on diaspora remittances.

Subsequently, on January 22, 2021, the CBN issued another circular, setting out the modalities for the payout of diaspora remittances.

The new circular was issued owing to the disregard of the CBN directives by IMTOs and other unlicensed companies operating within the system.

According to the CBN, some IMTOs and unlicensed companies continue to facilitate diaspora remittances into the country in Naira, in clear contravention of the CBN directive that all remittances be paid to beneficiaries in dollars.

Nigerian Tribune reports that it is therefore hoped that the strict punitive measures imposed by the CBN will increase compliance by all stakeholders and ultimately lead to an increase in the availability of foreign currency within the country.

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