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Wired transfers hit N477/$1 at black market - NAIRAMETRICS

JULY 30, 2020

Exchange rate disparity between the parallel and black market remains as high as N85.75

BY  Chike Olisah

Nigeria's exchange rate at the NAFEX window appreciated to N389.25 during intraday trading on Wednesday July 29th 2020. In contrast, the exchange rate at the parallel market remained unchanged for the second day in a row after hitting a new low on Monday, July 27th when it closed at N475/$1.

 

Market Watch

Parallel market: At the black market where forex is traded unofficially, the naira remained unchanged for the second consecutive day against the dollar to close at N475/$1 on Wednesday, according to information from AbokiFX, a prominent FX tracking website. This was the same rate that it exchanged on Tuesday, July 28. Some traders contacted by Nairametrics research also confirmed the same price as N475/$1.

However, wired transfers cost as high as N477/$1 an additional N2 premium. Wired transfers represent non cash forex transactions between a buyer and a seller without going through the official channels. Wired transactions occur through bank accounts and usually cost more.

The naira fell to as high as N392.50 during intraday trading before strengthening to the closed rate of N389.25. It also sold for as low as N380/$1 during intraday trading. Forex is sold at several prices during the day.

The 0.4% depreciation week on week (it was N388.5/$1 coming into last week) is perhaps attibuted to the weaker forex turnover that was experienced last week.

Forex Turnover: Meanwhile, forex turnover at the Investors and Exporters (I&£) window recorded a decline on Wednesday, July 29, 2020, as it dropped by 52.1% day on day. According to the data tracked by Nairametrics from FMDQ, forex turnover decreased from $39.31million on Tuesday, July 28, 2020, to a low $18.83 million on Wednesday July 29, 2020.

The average forex sale for last week was as low as $27 million compared to $47 million the week before. We also noted that on no day last week did we record a sale close to or above $100 million, the first time this month. FX turnover remains subdued this week as Nigeria approches a two day holiday in the last two days of July.

The average forex sale for last week was as low as $27 million compared to $47 million the week before. We also noted that on no day last week did we record a sale close to or above $100 million, the first time this month. FX turnover remains subdued this week as Nigeria approaches a two-day holiday in the last two days of July.

Exchange rate disparity

The exchange rate disparity between the official NAFEX rate and the black market rate remained wide on Tuesday staying as wide as N85.75. Nigeria maintains multiple exchange rates comprising the CBN official rate, the BDC rates, SMIS and the NAFEX (I&E windo).

Exchange rate unification remains on the cards and yet to be iimplemented weeks after the central bank governor confirmed it will be executed.

The minister of Finance also admitted that Nigeria was seeking unification of it's forex windows, a move thought to be in line with the requirements from the World Bank. Nigeria is seeking a world bank loan of up to $3 billion. the country has been under pressure from the International Monetary Fund and the World Bank for currency reforms.

Exchange rate unification remains on the cards and yet to be implemented weeks after the central bank governor confirmed it will be executed.

The minister of Finance also admitted that Nigeria was seeking unification of its forex Windows, a move thought to be in line with the requirements from the World Bank. Nigeria is seeking a world bank loan of up to $3 billion. The country has been under pressure from the International Monetary Fund and the World Bank for currency reforms.


COVID-19 Pressures

Nigeria's airspace remains closed to commercial international flight operations and won't be open till October 2020. Foreign Travel has often been a source of demand for the greenback.

The erecent demand for dollars at the parallel market is thought to be fueled by speculators. The parallel market also caters to forex trades through wire transfers expecially for buyers who cannot fulfil their dollar demands at the I&E window or the SMIS window. The exchange rate for wired transfer is often at a premium to the black market rate,

Forex Challenges: Last week has been one of the most challenging for the foreign exchange market as it witnessed very low liquidity. The downward slide against the greenback and some other major currencies have continued this week due to tightened liquidity in the syste.

Dollar shortages have plagued the country for some months after the crsh in oil prices. Nigeria's major foreign exchange earner, thereby shifting demand to the black market. The increasing disparity between the official rate and the black market rate will most likely encourage more speculation at the foreign exchange market.


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