The naira is beginning to strengthen against the dollar as it closed to a record high of N460/$ gaining N30 or 6.12 percent compared with N490/$ last week.
At the parallel market, the local currency gained N15 against the greenback as it closed at N475 on Friday, representing 3.06 percent compared with N490/$ on Thursday last week. The naira appreciation is attributed to resumption of dollar sales to the end users by Bureaux De Change (BDC) operators. BusinessDay gathers that
Travelex, a global foreign exchange dealer, sold dollar to 820 BDCs last week, which helped shore up the naira on Friday to N475/$.
Aminu Gwadabe, acting president of Association of Bureaux De Change Operators of Nigeria (ABCON), believes that the naira will further strengthen to N420 if the dollar is distributed to about 3,000 BDCs across the country. “With the entrance of BDCs into the foreign exchange market, with the control of any other leakages, naira will strengthen further,” Gwadabe tells BusinessDay by phone. He says in the next couple of weeks 1,700 BDCs will receive dollar sales from Travelex, adding that the partnership between the two is transparent.
The naira remained pressured this week as a result of illiquidity in virtually all segments of the FX market, as the naira/dollar exchange rate at the parallel market crashed to an all-time low of N490/$ on Friday, compared with N440/$ on Monday, but later appreciated to N475/$ in the evening.
However, the exchange rate at the interbank has remained broadly stable as a result of frequent interventions by the apex bank. The naira/dollar spot rate opened the week at N308.50/$ on Monday but depreciated to N312.99/$ by midweek before appreciating to N305.31/$ by Thursday, as the CBN intervened with dollar supply. The interbank spot rate closed the week at N311.62/$.
In the futures market, investors continue to take advantage of the OTC FX Futures to hedge exposures to the Nigerian market in a bid to limit currency movement risk.
Accordingly, the total value of open OTC FX Futures contracts rose by $614.1 million M-o-M at the end of September. The apex bank issued $1 billion of the September 20, 2017, instrument at N243.50/$ to replace the September 28, 2016, instrument which matured during the week, analysts at Afrivest Securities Limited said.