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February 19, 2024
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Naira weakens as banks’ dollar sales plummet by $252m

Dollar sales by Deposit Money Banks and other entities at the Nigeria Autonomous Foreign Exchange Market (NAFEM) took a significant hit, plummeting by $252 million to $84.1 million on Friday. This marks a substantial 74 percent decrease from the $331.1 million transactions reported on Thursday.

Simultaneously, the official exchange rate witnessed the Naira depreciating to N1,537/$ on Friday, compared to the N1,498/$ recorded at the close of Thursday’s trading activity. Data from FMDQ Security Exchange reveals a 74 percent decline in forex turnover to $84.10 million on Friday, down from $336.11 million on Thursday. Notably, the Central Bank of Nigeria, oil firms, and multinationals also participate in dollar sales at NAFEM.

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At the parallel market, the Naira’s depreciation continued, reaching N1,670/$ on Friday, compared to the N1,600/$ recorded on Thursday, driven by steady demand for the greenback.

Throughout the week, forex supply fluctuated, starting at $116.11 million on Monday, increasing to $381.92 million on Tuesday, dropping to $117.87 million on Wednesday, and rising again to $336.11 million on Thursday.

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Experts attribute the Naira’s depreciation to robust demand for dollars from speculators and individuals traveling for business, tourism, education, and health purposes.

Despite the Central Bank’s efforts to boost forex supply through various policy interventions, challenges persist in the forex market. The gap between official and parallel market rates is widening, raising concerns about potential round-tripping activities. The Central Bank’s recent circulars include mandates for banks to sell excess dollar stock, warnings against hoarding foreign currencies for profit, and restrictions on Personal Travel Allowance payments. The apex bank also advised International Oil Companies against repatriating all revenue at once and revised guidelines to prevent under-invoicing of exports and over-invoicing of imports.

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Despite these measures, the forex market continues to face challenges, and financial institutions are implementing operational adjustments in response to the revised remittance framework.

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