Naira Rises To N1590/$ In Parallel Market As Forex Inflows Hit $25bn
In the parallel market, the value of the Naira increased from N1,595 per dollar on Wednesday to N1,590 per dollar on Thursday. In a similar vein, the Naira strengthened on the Nigerian Autonomous Foreign Exchange Market, or NAFEM, Wednesday, reaching N1,596.52 per dollar. The indicative exchange rate for NAFEM dropped to N1,593.62 per dollar from N1,596.52 per dollar on Wednesday, according to data from FMDQ, indicating a N2.9 appreciation for the naira.
From $93.92 million traded on Wednesday to $141.99 million on Thursday, the market's dollar volume jumped by 51%. As a result, the difference in value between the NAFEM rate and the parallel market increased from N1.52 to N3.52 per dollar on Wednesday. In the meantime, the Central Bank of Nigeria reported that, in the first half of 2024, net foreign exchange inflows into the nation reached $25.4 billion, up 55% over the same period the previous year.
The CBN's disclosure regarding foreign exchange movements coincided with the apex bank's $876 million auction to 26 banks to settle outstanding foreign exchange demands.
The apex bank said in a statement on Thursday that record inflows from remittances from the diaspora through official channels and an increase in capital importation, which hit $6 billion in June 2024, were the main drivers of this surge.
The CBN's policy objectives are yielding tangible results and bolstering market confidence, the statement stated. Between January and June, net foreign exchange flows increased by 55% year over year to $25.4 billion. Increased capital importation which hit $6 billion in June 2024 and record inflows of remittances from the diaspora via official channels have been the main drivers of this expansion.
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The CBN also stated that in the last three weeks, more than $305 million in foreign exchange has been sold to approved dealers via a two-way quote mechanism that has been implemented in recent months to improve interbank market liquidity. The announcement claims that the CBN bid $876 million to match bids made by clients at an auction that ended on Wednesday, August 7, 2024.
The Retail Dutch Auction System was used to accomplish this. Its goals include facilitating FX sales to end users directly, increasing market transparency, lowering information asymmetry, and assisting in price discovery.
The apex bank offered $876 million to satisfy bids made by customers at an auction that ended on Wednesday, August 7, 2024, as the most recent example of the Central Bank of Nigeria's continued commitment to support the proper operation of the foreign exchange market by enhancing liquidity when necessary, according to the statement.
As part of its commitment to give all eligible clients transparent access to foreign exchange, the CBN's leadership has added a second channel, the Retail Dutch Auction System to help with FX sales to end users. This strategy seeks to promote price discovery, lessen information asymmetry, and increase market transparency.
It is an addition to the two-way quote system that has been used in recent months to improve interbank market liquidity, allowing for the sale of over $305 million in foreign exchange to authorized dealers in the last three weeks.
The top bank further stated that, as of July 2024, its share of the $43 billion foreign exchange turnover reported on the official market was less than 5%. The CBN said in a statement that the FX market is improving and becoming deeper, and that the continuous convergence of exchange rates across all market segments is being facilitated by increasingly stable and diverse sources of liquidity. The foreign exchange market is also showing signs of improvement and increased depth, the statement continued. Sustained convergence of exchange rates across all market segments is facilitated by more robust and diversified sources of liquidity.
The CBN emphasized that it will keep building the market's ability to serve the interests of all eligible stakeholders and that it is dedicated to promoting a transparent, market-driven environment for foreign exchange. Under Olayemi Cardoso's direction, the CBN has implemented a number of measures to stabilize the foreign exchange market and increase efficiency since he took office last year.
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The lives of ordinary individuals have not improved despite claims to the contrary by government officials, who point to the high cost of living and skyrocketing rates of inflation.
