The gap between the official and black market rates is shrinking—courtesy of the Central Bank of Nigeria (CBN), which has pumped over $4 billion into the interbank, bureaux de change, wholesale spot and forwards auction. The injection has been in the last three months.
The exchange rate gap yesterday narrowed to N80 from N214 on February 20. The naira was quoted at N386/$ on the black market and remained at N306/$ on the official market, representing N80 gap. This is a huge improvement from February 20 rates of N520/$ in the parallel market and N306/$ in the official market, representing a N214 spread.
The CBN has also injected additional $457.3 million into various segments of the market. A breakdown of the offers indicates that both the spot and forwards segments garnered a total of $267.3 million while the wholesale segment got $100 million.
Also, the Small and Medium Enterprises (SMEs) and invisibles segments comprising of basic travel allowance, tuition fee and medical got $50 million and $40 million respectively.
The currency crisis started after crude oil prices dropped to a new low, which also affected the foreign reserves and created chronic dollar shortages, frustrating businesses and individuals.
Reports on the CBN’s interventions showed that since February, the regulator has sold more than $4 billion to boost dollar liquidity, win foreign investors interest and confidence in the forex market.
The dollar disbursements/ interventions continue as Nigeria’s oil revenue estimated at a monthly value of $2.5 billion. The demand for forex from the market has continued to be about $4.8 billion monthly.
Last week, the CBN auctioned an undisclosed amount of dollars through book building to settle a backlog of demand for airlines, fuel and raw material imports. The apex bank had asked lenders to bid for hard currency for specific sectors in efforts to improve dollar liquidity.
Findings on the volume of trading on the Investors and Exporters foreign exchange window in the past three weeks on the FMDQ platform revealed that the sum of $600 million has for been sold by both the CBN and autonomous sources.
CBN spokesman Isaac Okorafor expressed satisfaction with the level of activities in the market.
Okorafor singled out the Investors and Exporters segment noting that the volume of activities is indicative of the fact that investors were being attracted to the financial market and the economy.
However, speaking on exchange rate stability, Managing Director, Renaissance Capital (RenCap) Nigeria Temi Popoola, said the rate at which the naira exchanged against the dollar is inconsequential. He said the most important thing was for the investors to be able to come into the country and exit at will without encumbrances.
“The argument should not be whether the naira is exchanged at N300 or N450 to dollar. It should be whether investors will be able to come in and go out of the market,” he said adding that the newly introduced Investors/Exporter Window is addressing the challenge.