Dollar Glut Hits Forex Market as Naira Strengthens to N363/$

By Obinna Chima

The impact of the sustained dollar supply by the Central Bank of Nigeria (CBN) has continued to have positive effect on the foreign exchange (forex) market as the sell side of the Naira exchange rate against the Dollar appreciated significantly by N12, to close at N363/$ on the parallel market yesterday, as against  the N375/$ it was the previous day.

Also, the buy rate of the greenback closed at N369 to the dollar yesterday, stronger than the N382 to the dollar it was previously.

The latest gain recorded on the forex market shows a gradual move towards rate convergence in the forex market, which is the target of the apex bank.

The CBN has injected about $5 billion into the forex market since February, in a bid to ensure stability in the forex market.

This week, it injected $482.6 million into the market. This, the bank had said underlined its determination to guard the value of the naira. A breakdown of the intervention this week had indicated that the retail Secondary Market Intervention Sales (SMIS) was allocated the sum of $285,779,350, while $100 million was offered in the Wholesale SMIS auction window. In addition, the Small, Medium and Enterprises (SMEs) window got an allocation of $52 million, while the invisibles segment, comprising Basic Travel Allowance (BTA), Personal Travel Allowance, medicals and tuition fees, among others, was allocated the sum of $45 million.

CBN Governor, Mr. Godwin Emefiele had last week recalled that about three months ago, the local currency was trading at above N500 to the dollar on the parallel market, but has appreciated to between N370 and N375/$.

Describing this as a significant achievement vis-à-vis the convergence, Emefiele noted that the monetary authorities would however prefer a convergence that would head southwards rather than northwards.

“We would prefer a convergence that will significantly head southwards, than a convergence that will go northwards. The fact that we have seen a convergence in the southward direction gives us a lot of hope that things are working in the right direction,” he said.

On how far the CBN would go in sustaining its market interventions, he had said: “I have said it and I will repeat myself that the interventions will be more vigorous than before to underscore the fact that we are determined to ensure that the Nigerian economy recovers, by making sure that foreign exchange is being made available to operators of the economy to conduct their businesses.”

Meanwhile, the country’s external reserves stood at $30.330 billion as at May 31, 2017, representing a decline by $644 million in one month, compared with the $30.974 billion it was as at May 2.