Naira Strengthens Against US Dollar at Peer-to-Peer, Black Market
By Dipo Olowookere
The domestic currency had a breather in the peer-to-peer (P2P) and the parallel market segments of the foreign exchange (FX) market on Wednesday, with its value strengthening against the Dollar at the two windows.
This was supported by the ease in the forex demand pressure during the trading session, which had the official market, the Investors and Exporters (I&E) arm of the market, non-operational yesterday due to the public holiday observed in the country for Eid el Maulud.
Many customers who may have needed FX for their transactions stayed back to enjoy the work-free day, easing off the pressure on the forex market in the midweek session.
As a result, the local currency appreciated against the US Dollar in the P2P on Wednesday by N7 to quote at N1,013/$1 compared with the preceding day’s exchange rate of N1,020/$1.
Similarly, the value of the Naira improved against the greenback in the black market during the trading day by N5 to close at N994/$1, in contrast to Tuesday’s closing price of N999/$1.
Despite the gains yesterday, FX traders on the streets maintained that the forex demand will persist due to a shortage in supply to the market windows.
The new Governor of the Central Bank of Nigeria (CBN), Mr Yemi Cardoso, while being screened by the Senate on Tuesday, said his key focus would be to boost the value of the Nigerian currency.
He admitted that the Naira was depreciating in value because of the inability of the bank to clear the backlog of forex obligations, which is speculated to be around $7 billion.
Mr Cardoso has also been charged by economists, including the chief executive of the Centre for the Promotion of Private Enterprise (CPPE), Mr Muda Yusuf, to quickly work on this.
“The clearance of the backlog of forex obligations should be accorded high priority to restore the confidence of domestic and foreign investors,” Mr Yusuf had said in a press statement titled Ten Point Agenda For The CBN Governor.
He also suggested the creation of an “autonomous window in the banking system where the currency can trade freely without any encumbrances” to help reduce dependency on alternative FX windows.
According to him, this should be added to the existing I&E forex window.