Business

Forex Scarcity Sends Naira Tumbling Unprecedentedly

Published

2 years ago

September 14, 2023

There are indications that exchange rate crises that trailed the foreign exchange market reforms in June 2023 may linger further as supply gap led to further depreciation of Naira in the parallel market yesterday to N930/ $1, down from N925 mid last week.

However, the exchange rate improved week-on-week in the Investors and Exporters (I&E) window to N758.1 from N775.6.

The prevailing exchange rates indicates a rising parallel market premium which is the gap between the parallel market rate and that of the I&E window.

The gap, as at last week Wednesday, was N153.41 per dollar, but has risen to N171.9 per dollar by yesterday, a development which has created a huge incentive for round-tripping and arbitraging in the foreign exchange market ecosystem.

Moreover, market observers have also noted that the Bureau de Changes, BDCs, have not helped the market as envisaged a month ago when the segment was re-admitted into the Central Bank Of Nigeria, CBN, official trading window for the purpose of opening the market to more independent forex supply and better access for individual retail end users.

The BDCs have, instead, lamented that the renewed depreciation of the local currency was mainly due to the scarcity of the foreign currencies.

A BDC operator told Vanguard that the scarcity is so much that ‘‘even some Nigerians are unable to withdraw forex from their domiciliary accounts in banks”.

He said the lifting of the ban by the CBN on sales of forex to BDC operators has failed to help resolve the scarcity as the banks are not selling to the BDCs.

Data from FMDQ showed that the market opened at N761.24 to the dollar, recording a high of N807.15 and a low of N738.

A total of $42.26 million was traded in foreign exchange at the I&E window.

On Tuesday, CBN said a review of the change in the forex regime showed that banks are in a position to profit from its potential to significantly increase the naira value of banks’ foreign currency (FCY) assets and liabilities.

The apex bank directed deposit money banks, DMBs, to stop utilising gains from the revaluation of the naira to pay dividends or finance operations.

Some financial market analysts

CBN should reduce BDCs through mergers, acquisition—Prof Uwalake

Commenting on the renewed depreciation of the naira even with the lifting of ban on sale of forex to BDCs, Prof Uche Uwaleke, President. Association of Capital Market Academics of Nigeria, ACMAN said: “Recall that the ban was placed in the first place due to the abuses associated with the selling of Forex to BDCs due to their large and unmanageable number.

‘‘If the CBN has established a need to resume such sales, then it should first trim the over 5000 BDCs to a controllable number of less than 1000 through a regulatory-induced merger and acquisition.

‘‘It is only then that the CBN can be in a position to effectively supervise the BDCs else the CBN ends up going round in circles.”

Allocation of forex to BDCs may not address scarcity- Adonri

Also commenting, David Adonri, analyst and Executive Vice Chairman at Highcap Securities Limited, said: “Since BDCs are authorized retail dealers licensed by CBN, sale of forex to them is in order.

‘‘However, CBN should endeavor to sell to all its authorized buyers at the prevailing open market price in order to avoid rent seeking abuses. This U-turn may not address scarcity but provide a level playing field for participants in the foreign exchange market.”

I doubt there will be any improvement Chiazor

Another financial expert, Victor Chiazor, Head of Research and Investment at FSL Securities Limited, said: “The CBN’s decision to lift the ban on sale of Forex to BDCs would have aided liquidity in the FX market if the CBN actually had enough FX in its vaults.

‘‘But I doubt there will be any change to the current pressure on the Naira.

“The case today is that our FX reserves which is at around $33 billion while the net liquid position is far lower, which means that in real terms the CBN does not have the required FX liquidity to meet the current FX demand, not also forgetting the existing backlog of FX payments owed to businesses.”
VANGUARD

Business

Naira Depreciates Against Dollar

Published

2 days ago

July 4, 2025

Editor

The Naira experienced a slight depreciation on Friday at the official market, trading at N1,528.56 to the dollar.

Data obtained from the website of the Central Bank of Nigeria (CBN) showed that the Naira lost N2.73.

This represents a 0.17 percent loss compared to the N1,525.82 recorded on Thursday.

The Naira, which opened the week on Monday with a gain of N9.52 against the dollar, held steady gains until Thursday.

On Wednesday, the local currency gained N3.42 against the dollar and received commendation from the International Monetary Fund (IMF).

The IMF, in its 2025 Article IV Consultation report on Nigeria, commended the CBN for its reforms to the foreign exchange market, which supported price discovery and liquidity.

Business

JUST IN: Dangote Refinery Hikes Petrol Ex-depot Price

Published

2 weeks ago

June 20, 2025

Editor

Nigerians may soon pay more for petrol as the Dangote Petroleum Refinery on Friday increased its ex-depot price for Premium Motor Spirit to N880 per litre, raising fresh concerns over fuel affordability and price volatility in the downstream sector.

Checks on petroleumprice.ng, a platform tracking daily product prices, and a Pro Forma Invoice seen by The PUNCH confirmed the hike, representing a N55 increase from the previous rate of N825 per litre.

The increment would ripple across the entire fuel distribution chain, likely pushing pump prices above N900/litre in some parts of the country, especially in areas far from the distribution hubs.

The hike comes despite global crude prices falling. Brent crude dipped by 3.02% to $76.47, WTI fell to $74.93, and Murban dropped to $76.97 on Friday. The decline in benchmarks offers little relief due to persistent fears of sudden supply disruptions.

The refinery has increased its reliance on imported U.S. crude and operational costs amid exchange rate instability, which adds to its pricing pressure.

On Thursday, the President of the Dangote Group, Aliko Dangote, said his 650,000-barrel capacity refinery is “increasingly” relying on the United States for crude oil.

This came as findings showed that the Dangote Petroleum Refinery is projected to import a total of 17.65 million barrels of crude oil between April and July 2025, beginning with about 3.65 million barrels already delivered in the past two months, amid ongoing allocations under the Federal Government’s naira-for-crude policy.

Dangote informed the Technical Committee of the One-Stop Shop for the sale of crude and refined products in naira initiative that the refinery was still battling crude shortages, which had led it to resort to imports from the United States.

On Monday, the president of the Petroleum and Natural Gas Senior Staff Association of Nigeria, Festus Osifo, accused oil marketers of exploiting Nigerians through inflated petrol prices, insisting that the current pump price of PMS should range between N700 and N750 per litre.

He criticised the disparity between falling global crude oil prices and the stagnant retail price of petrol in Nigeria.

“If you go online and check the PLAT cost per cubic metre of PMS, convert that to litres and then to our Naira, you will see that with crude at around $60 per barrel, petrol should be retailing between N700 and N750 per litre.”

He asserted that if Nigerians bear the brunt of higher fuel costs, they should be allowed to enjoy the benefit of low pricing.

His forecast of increased costs now appears spot on, considering the latest developments.

Marketers are already adjusting. Depot owners and fuel distributors in Lagos and other cities anticipate a domino effect, with new price bands expected to follow Dangote’s lead.

Many had held back pricing decisions since Tuesday, when the refinery halted sales and withheld fresh PFIs. The delay fueled speculation, allowing opportunistic price hikes across various depots.

Business

Naira Appreciates At Official Market

Published

1 month ago

May 24, 2025

Editor

The Naira, which has seen steady appreciation against the Dollar all week, closed stronger on Friday, trading at ₦1,580.44 in the official forex market.

Data from the Central Bank of Nigeria’s website show the Naira gained ₦4.51k against the Dollar on Friday alone.

This marks a 0.28 per cent appreciation from Thursday’s closing rate of ₦1,584.95 in the official foreign exchange window.

The local currency maintained consistent strength throughout the week, recording gains daily.

On Monday, May 19, it traded at ₦1,598.68; on Tuesday, at ₦1,590.45; and on Wednesday, at ₦1,584.49.

These gains suggest increased investor confidence and improved forex supply, contributing to the naira’s performance.

Meanwhile, the CBN, at its 300th Monetary Policy Committee meeting held Monday and Tuesday, retained the Monetary Policy Rate at 27.5 per cent.