Dollar supply in the official foreign exchange market rose by 180.59 percent to $440.13m on Friday.
This is as the naira closed the week at N1435.53/$ on Friday after what was a turbulent week. According to data from FMDQ Security Exchange, forex turnover rose by 180.59 percent to $440.13m on Friday from $156.86m on Thursday. However, aside from commercial banks, the Central Bank of Nigeria, oil firms and multinationals also sell dollars at NAFEM.
The improved liquidity is following moves by the Central Bank of Nigeria to stabilise the foreign exchange rate. Before closing at N1435.53/$ on Friday, the naira traded at an intraday high of N1526/$ and low of N838.96/$.
At the parallel market, on Friday, the naira closed at N1,420/$ with a steady demand for the greenback.
Last week, the apex bank rolled out new circulars and guidelines to boost liquidity and narrow the gap between the parallel and official rates of the foreign exchange market. In its most significant foreign exchange guideline, last week, the CBN ordered banks to adjust their FX exposures.
Don’t be left stranded by the next Facebook outage. Click image to subscribe!
In its circular titled, “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks”, the apex bank expressed worry over the growing trend of banks holding large foreign currency positions.
It said, “The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”
The CBN mandated that banks’ NOP must not exceed 20 percent short or 0 percent long of the bank’s shareholders’ funds going forward. It gave a February 1, 2024 deadline to those who had exceeded its limit.
A top bank executive, who spoke on condition of anonymity, told The PUNCH that the new circular would force banks to sell about $5bn.
One top banker said, “Just as some Nigerians prefer to keep their money in dollars because the naira is not a good store of value, banks also hold excess dollar liquidity to make gains. They do their own at the institutional level.
“What the CBN is saying with this new circular is that you cannot hold excess dollar liquidity again. Any foreign exchange you are holding must be committed to something, a transaction, or an obligation you can prove. Banks have made a lot of revaluation gains. Some banks, I believe, got approval under the last administration to hold more dollars than the requirement. The idea is that if banks sell all these excess dollars, there will be liquidity and the exchange rate will stabilise. Foreign investors will come in.”
On Friday, reported that banks were working to meet the CBN’s new requirement.
Meanwhile, on Friday, S&P Global Ratings affirmed its ‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings on Nigeria. It also affirmed its ‘ngBBB+/ngA-2’ long- and short-term Nigeria national scale ratings and maintained a stable outlook for the country.
According to the global rating firm, the stable outlook is based on the government’s capacity to continue its reform agenda, which, if delivered, would support growth and fiscal outcomes.
>>> Read full article>>>
Copyright for syndicated content belongs to the linked Source : Goldmyne.tv – https://goldmyne.tv/nafem-dollar-supply-rises-by-180-as-banks-sell-440m/
