Banks offload $3.3 billion amid the Central Bank’s efforts to counter a renewed decline in the naira

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The naira experienced a renewed decline in both the official and parallel foreign exchange markets on Friday.

The national currency depreciated to N1,670/$ from the previous day’s N1,600/$ at the parallel market, while the official rate closed at N1,537/$, up from N1,498/$.

This widening gap of N133 between the official and parallel markets raised concerns about potential round-tripping activities.

Despite efforts to boost forex supply, including a total transaction volume of $3.83bn in eleven days through the Nigerian Autonomous Foreign Exchange, the rates indicate challenges persist.

Commercial banks, CBN, and international oil firms were major sellers at NAFEM.

The liquidity improvement at NAFEM followed the CBN’s directive for banks to sell excess dollar stock.

However, the gap between official and parallel market rates is increasing, prompting worries about the resurgence of roundtripping.

Despite these challenges, the Central Bank Governor, Olayemi Cardoso, confirmed positive results in FX transactions.

Recent reforms aimed at enhancing liquidity were acknowledged, but concerns about the growing gap between market rates persist.

In response to the CBN’s circular, banking institutions and IMTOs are adjusting operations.

The revised remittance framework is expected to stimulate increased remittance inflows and boost the country’s foreign exchange reserves.

On the official FX market, the naira started at an all-time low of N1,534/$, impacting the prices of goods and services.

While the naira gained marginally on Tuesday, it closed the week at N1,537/$.

In the parallel market, the naira depreciated to N1,670 on Friday, reflecting strong demand for dollars.

Speculators and individuals traveling for business, tourism, education, and health were cited as contributing to the increased demand.

Bureau De Change operators noted a consistent rise, with the dollar approaching N1,700. Despite starting at N1,610 on Friday, it briefly surged to N1,680 due to market demand.

The President of NACCIMA, Dele Oye, urged the government to address naira devaluation and inflation.

A stable currency is essential for affordable agricultural inputs and increased consumer purchasing power.

Oye commended efforts to boost local food production but emphasized the multifaceted issue of rising food costs, including the impact of the depreciating value of the naira.

He appealed for enhanced security and infrastructure in farming communities to mitigate risks faced by farmers and increase efficiency in the agricultural value chain.

The plea comes amid a protracted inflationary pressure and exchange rate crisis in the Nigerian economy, with January 2024 recording an inflation rate of 29.90 percent.

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