Nairametrics can confirm that the exchange rate between the naira and
dollar has depreciated to N390/$1 at the FMDQOTC NAFEX market, an
official market where the exchange rate is traded.
We first observed the depreciation
in our daily market survey on Thursday, November 26th when it traded at
N390/$1. The rate remained the same today confirming that it is not a
one-off. The exchange rate closed at N390.25/$1 on Friday after trading
at a high price of N400.37 and a low price of N383/$1. The exchange rate
at the NAFEX market has traded between N383 and N385 per dollar
respectively.
CBN Devalues
A recent circular seen by Nairametrics, also suggests the CBN has
devalued the exchange rate between the dollar and naira sold to the
BDC’s to N390/$1. The circular also mandates the BDCs to sell to
potential buyers at N392/$1. The volume of sales for each market is
$10,000 per BDC.
See excerpt of the circular:
Please be advised that the applicable exchange rate for the
disbursement of proceeds of IMTOs, for the period Monday, November 30th
to Friday, December 14, 2020, is as follows.
I. IMTSOs to banks – N388/1USD
II. Banks to CBN – N399/1USD
III. CBN to BDCs – N390/1USD
IV. BDCs to end-users Not more than N392/1USD
V. Volumes of sale for each market is USD10,000.00 per BDC
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The circular seen by Nairametrics was signed by Dr. O.S. Nnaji,
Director of Trade and Exchange at the CBN, and dated November 30th,
2020. We also understand the CBN intervened in the market today at a
spot price of N393.37/$1 while its 150 days forward rates moved to
N399.37 in a bid to clear backlogs. Nairametrics estimated pent-up
demand could be between $2 billion and $3.5 billion.
What you should know
Last August, the CBN devalued the naira after issuing a circular
authorizing dealers instructing them to sell forex to end-users at
N386/$1. It was the first time the CBN will be selling forex to BDC
traders since it stopped on March 27th as the country faced an imminent
lockdown. Since then, the exchange rate at the black market has gone
from N395/$1 on March 27, 2020, to N495/$1 as of November 27, 2020,
exactly 8months later.
- The exchange rate at the parallel market (black market) fell to
N495/$1 on Friday closing the week at the weakest price since 2017.
Wired transfers done outside of the official system closed as high as
N503/$1 according to Nairalytics monitored, the research arm of
Nairametrics.
- Just recently, Nairametrics learned that there are limitations to
the transfer of forex from domiciliary in Nigeria to accounts in the US.
However, it appears there are no restrictions to domiciliary accounts
that received inflows attributed to foreign-related income earned doing
business or wired inflows.
- Foreign investors appear to have also found new routes of moving to
repatriate their forex out of Nigeria. Some purchase shares of companies
that are dual-listed and then sell them on the London Stock Exchange.
We understand this may have contributed to the rise in the value of
Seplat and New Gold ETF, two stocks that are dual-listed. Airtel, also
listed in the UK, experienced a similar bump in prices.
- Oil prices rose on Friday as Brent Crude prices traded at $47.9. The
CBN needs oil prices to go above $50 if it wants to continue with the
controversial policy of defending the exchange rate.
READ: CBN announces resumption of sales of forex to BDC
Local Demand Pressure
Nigeria’s exchange rate situation has entered a precarious era of
uncertainty with demand coming from all corners. According to
Nairalytics research, Nigerians looking to take advantage of last-minute
Black Friday deals in the US have also contributed significantly to the
demand pressure. Holidaymakers are also sourcing for forex ahead of the
Christmas holiday as they anticipate more devaluations.
Nairalytics research also indicates some of the demand is coming from
business with local forex obligations such as servicing
dollar-denominated debts, expatriate staff, luxury items, imported items
without local substitutes, etc.
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