The official Nigerian Autonomous Foreign Exchange Market saw a 180.59 per cent increase in dollar supply on Friday, reaching $440.13 million.
This comes as the naira completed the week at N1435.53/$ on Friday. FMDQ Security Exchange data shows that FX turnover increased from $156.86 million on Thursday to $440.13 million on Friday, a 180.59 per cent increase. But in addition to commercial banks, NAFEM also sees the sale of dollars by the Central Bank of Nigeria, oil companies, and global corporations.
Improved liquidity is the result of actions taken by the Nigerian Central Bank to stabilize the foreign exchange rate. Friday’s closing rate for the naira was N1435.53/$. It had an intraday high of N1526/$ and low of N838.96/$.
The naira concluded at N1,420/$ on Friday in the parallel market, amid consistent demand for the US dollar.
The central bank released new circulars and recommendations last week in an effort to increase liquidity and reduce the difference between the official and parallel rates on the foreign exchange market. Last week, the CBN issued its most important foreign exchange guidelines, directing banks to modify their foreign exchange exposures.
The apex bank voiced concerns about the growing tendency of banks maintaining significant foreign currency assets in a circular titled “Harmonization of Reporting Requirements on Foreign Currency Exposures of Banks.”
The statement read, “The increase in banks’ foreign currency exposures as measured by their Net Open Position has drawn the attention of the Central Bank of Nigeria.
“This has produced an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”
The CBN stated that going ahead, banks’ net operating profit could not be more than 20% short or 0% long of the money owned by the bank’s shareholders. It set a deadline of February 1, 2024 for individuals who went above the limit.
A top banker stated, “Banks hold excess dollar liquidity to make gains, just as some Nigerians prefer to keep their money in dollars because the naira is not a good store of value.
“With this new circular, the CBN is stating that holding extra dollar liquidity is no longer permitted. Any foreign currency you own needs to be linked to a specific item, transaction, or duty that you can validate.
Also, on Friday, S&P Global Ratings affirmed its ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on Nigeria. It also affirmed its ‘ngBBB+/ngA-2’ long- and short-term Nigeria national scale ratings and maintained a stable outlook for the country.
The global rating firm stated that the stable outlook is based on the government’s capacity to continue its reform agenda, which, if delivered, would support growth and fiscal outcomes.