Naira depreciates to N663.04/$ amid CBN’s FX liberalisation

Naira at the Investors & Exporters Foreign Exchange Window (I &E FX) depreciated to N663.04 against the dollar from the N472.50 it opened the week, reflecting the impact of the foreign exchange market liberalisation announced by the Central Bank of Nigeria (CBN).

The naira traded high at N791 against the dollar and N461 low on Friday.

This means that the local currency appreciated by about 5.9 per cent within 24 hours from the N702.19/dollar recorded at the close of business on Thursday.

According to data from the FMDQ Securities Exchange, the naira hit N664.04 against the dollar at the close of trading at the I&E Window on Wednesday and N702.19/dollar on Thursday after the CBN directed banks to remove the rate cap on the naira at the official Investors’ and Exporters’ Windows of the foreign exchange market.

FMDQ Exchange disclosed that, investors & exporters’ total turnover trade stood at $311.83million as of June 16, 2023, with trades consummated within the N460– N791 against the dollar band.

Analysts at Cordros Research said: “In the weeks ahead, we expect the re-introduction of the ‘willing buyer, willing seller’ model at the IEW to influence the exchange rate direction.

“Nonetheless, while the CBN’s abolishment of its multiple FX windows is positive in boosting foreign investors’ confidence, we think they will adopt a wait-and-see approach, for now, looking for signals on the CBN’s plans to start clearing the FX backlogs and boosting FX supply to support the market in the near term.”

The CBN’s decision to float the currency was hailed by the organised private sector and economists who said the move would unify the country’s multiple exchange rates and boost the FX market.

The development means buyers and sellers of foreign currency in the official FX markets are now allowed to quote rates they find comfortable in the FX market, as against the previous practice where rates were dictated by the CBN.

While the official rate appreciated, there was depreciation on the parallel market, which opened at N750/dollar and closed at N760/dollar on Friday.

However, in a recent projection, the global investment bank Morgan Stanley, stated that the naira is expected to appreciate at the parallel market rate.

Also, the International Monetary Fund (IMF) has backed the apex bank  in unifying its foreign exchange market.

IMF in a statement on Friday by its Resident Representative for Nigeria, Ari Aisen, said it would continue to support the federal government with recommendations to mitigate the economic effects of forex reforms implementation.

“The Fund greatly welcomes the authorities’ decision to introduce a unified market-reflective exchange rate regime in line with our long-standing recommendations. We stand ready to support the new administration in implementing FX reforms,” he said.