Naira dollar exchange rate – The Commerce Africa https://thecommerceafrica.com African Reneissance Sun, 29 Nov 2020 06:59:05 +0000 en-US hourly 1 https://wordpress.org/?v=5.9 CBN Devalues Naira, Fixes Rate At N392/Dollar https://thecommerceafrica.com/cbn-devalues-naira-fixes-rate-at-n392-dollar/ https://thecommerceafrica.com/cbn-devalues-naira-fixes-rate-at-n392-dollar/#respond Sun, 29 Nov 2020 06:56:23 +0000 http://thecommerceafrica.com/?p=2797 The Central Bank of Nigeria (CBN) has directed bureau de change operators in the country not to sell dollars higher than N392 to end users.

The Central Bank also devalued the Naira by N6 to Dollar, this brings the Naira closer to the exchange rate unification policy recommended by the International Monetary Fund (IMF) and the World Bank.

In a circular signed by O.S. Nnaji, director of trade and exchange at the CBN, and dated November 30, 2020, the apex bank said the volume of sales for each market is $10,000 per bureau de change (BDC).

“Please be advised that the applicable exchange rate for the disbursement of proceeds of IMTOs, for the period Monday, November 30 to Friday, December 14, 2020, is as follows: International money transfer service operators (IMTSOs) to banks – N388/$1; Banks to CBN – N399/$1; CBN to BDCs – N390/$1; BDCs to end-users not more than N392/$1,” it read.

At the close of trading on Friday, figures from the financial market dealers exchange over the counter (FMDQ) NAFEX, an official market where the exchange rate is traded, also show that the exchange rate between the naira and dollar has depreciated to N390/$1 — lowest level since the introduction of the import & export (I&E) window in 2017.

This is about N4 higher than the N386 per dollar which the apex bank had sold dollars to the BDC operators.

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Devaluation of Naira: Understanding the Situation and the Risks for Investors https://thecommerceafrica.com/devaluation-of-naira-understanding-the-situation-and-the-risks-for-investors/ https://thecommerceafrica.com/devaluation-of-naira-understanding-the-situation-and-the-risks-for-investors/#respond Sat, 11 Jul 2020 10:33:26 +0000 http://thecommerceafrica.com/?p=987 The Nigerian currency has been losing value for the past two days on the FMDQ OTC securities exchange, a privately owned alternative financial market platform on which currency and bond securities are traded in Nigeria. The naira ended the day of July 8, 2020, at 386.75 naira for one US dollar. At one point during the day, it even reached 391.3 for a dollar.

This represents a loss of 8.6% on the official rate applied by the Central Bank of Nigeria, which is 360 naira of a dollar. According to Bloomberg, this is a confusing situation for traders, especially as CNB is not commenting on it.

The information is critical for those who have acquired shares or bonds on the Nigerian financial market. If the currency continues to lose value, it means that repatriating their capital will be difficult. Since the crisis of 2015 and 2016, CBN has been applying a multiple exchange rate policy, which includes the official rate at which the institution places dollars on the local money market. There are also several market rates that are determined by supply and demand mechanisms on alternative markets.

Sign of the vulnerability of commercial banks on the currency market

This devaluation of the currency which seems surprising can however be explained. The dollars on the alternative market mainly come from commercial banks but the latter need strong exports to meet demand in a meaningful way.

“Nigeria’s banks are facing foreign currency shortages because of low oil prices, volatile foreign inflows and lower remittances amid the pandemic, threatening to renew foreign currency liquidity pressures that blighted them during a previous oil crisis in 2016-2017,” rating agency Moody’s said in a July 1 statement.

According to the rating agency, Nigerian banks managed to reduce their foreign currency funding gap to only $984 million at the end of 2019. For the coming years, this deficit is expected to be $3.8 billion, a level relatively solid compared to the $5.8 billion in 2016. But in contrast to that period, uncertainties in the international debt market have become even greater.

The outlook is not more positive if the recovery of Nigeria’s partner economies is not as strong as envisaged. The 9 largest banks listed on the Lagos Stock Exchange (excluding Stanbic, a subsidiary of Standard Bank Group) ended 2019 with a debt of $7 billion. 49% of these bonds are due in 2020 and 2021, which will put pressure on these financial institutions.

A new battle for currencies seems to be opening up in Nigeria. Several listed companies with foreign investors are likely to face difficult times. Divestments are likely to drive down their stock market value. Similarly, for those whose operating expenses are denominated in dollars, foreign exchange losses are likely to increase and put pressure on net margins.

(Ecofin Agency) – Idriss Linge

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