On Friday, July 12, 2024, the naira closed at N1,563.80/$1, marking a new low for the month of July as it rebounded from the day’s small appreciation.
The currency rate between the naira and the dollar decreased by 0.59% from N1,554.65/$1 on Thursday, as reported by the FMDQ.
The Central Bank of Nigeria (CBN) sold a dollar valued at $122.67 million to 46 authorised dealers over the course of two days, which led to the depreciation.
The local currency crept closer to the N1,600 barrier on Friday, trading between a low of N1,496.46/$1 and a high of N1,586/$1.
A cash crunch follows CBN’s FX sales
For the first time this week, foreign exchange (FX) turnover has collapsed, with a notable decline of 63.73% on Friday.
FX turnover increased by 14.19% at the beginning of the week to reach $133.46 million on Monday.
The amount had increased by 41.01% to $188.19 million by Tuesday. On Wednesday, the rise accelerated by 25.78%, reaching $236.7 million.
FX turnover reached its highest point on Thursday at $348.82 million, with the highest rise rate of 47.37%.
The apex bank’s dollar sales on Wednesday and Thursday aligned with this peak.
The CBN’s Director of Financial Markets, Dr. Omolara Duke, revealed in a statement that the apex bank bought $2.5 million from one authorized dealer and sold $67.5 million to 27 authorized dealers on Wednesday.
For these trades, the bid range was N1,480/$1 to N1,500/$1. Payments for these transactions are expected to be made on July 12, 2024, after a settlement period of two days (T+2).
At a rate of N1,540.0/$1, the CBN sold $55.17 million to 19 authorised dealers on Thursday. On this date, no foreign exchange was bought. On July 15, 2024, the payments for these spot sales are expected.
The CBN also asked all licenced dealers to make sure that any foreign exchange acquired from the bank is only utilised for trade-backed transactions, which need to be disclosed to the authorities within 72 hours.
The official market, on the other hand, shrugs off the CBN’s boost as it reports its first decline to $126.5 million, its lowest point this week.
Things to note
The CBN allegedly sold more dollars on the official market in May in anticipation of a $1.3 billion non-deliverable forward (NDF), which matured on May 29, 2024, while the naira saw consecutive double-digit appreciation on the official market.
In an attempt to artificially decrease the exchange rate, the apex bank returned to its old tactic of selling foreign currency below the market rate, according to people with knowledge of the situation who spoke with Nairametrics in May.
They ended a three-day run of depreciation on Thursday, closing at N1,554.65/$1, after the CBN’s FX sales.
Nevertheless, the local currency fell to a new low in July, thus this rebound was not maintained.
