Naira crashes to N770.38/$1 as demand pressure hits Investors and Exporters

Forex market sources told Vanguard that the depreciation was majorly due to a surge in demand buoyed by over $3.7 billion matured Letters of Credit, LCs. The situation they stressed is worsened by supply shortage as the I&E window is yet to see significant forex inflow since the Central Bank of Nigeria, CBN, reintroduced the   willing seller, willing buyer model.

According to a source,   the volume of transactions is still very scant and they are from people who have urgent forex needs and are willing to buy at any exchange rate. Some of them were already used to buying dollars at the parallel market rate, and hence are used to buying dollars at above N700 per dollar.

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The development in the I&E window follows the new forex measures announced by the CBN on Wednesday.

Announcing the   new measures in a statement titled, “Operational Changes to the Foreign Exchange Market”, Director, Financial Markets, Dr. Angela Sere-Ejembi, said, “The Central Bank of Nigeria (CBN) wishes to inform all authorized dealers and the general public of the following immediate changes to operations in the Nigerian Foreign Exchange (FX) Market:

“Abolishment of segmentation. All segments are now collapsed into the Investors and Exporters (I&E) window. Applications for medicals, school fees, BTA/PTA, and SMEs would continue to be processed through deposit money banks.

“Re-introduction of the “Willing Buyer, Willing Seller” model at the I&E Window. Operations in this window shall be guided by the extant circular on the establishment of the window, dated 21 April 2017 and referenced FMD/DIR/CIR/GEN/08/007. All eligible transactions are permitted to access foreign exchange at this window.

“The operational rate for all government-related transactions shall be the weighted average rate of the preceding day’s executed transactions at the I&E window, calculated to two (2) decimal places.

“Proscription of trading limits on oversold FX positions with permission to hedge short positions with Over-The Counter-futures. Limits on overbought positions shall be zero.

“Re-introduction of order-based two-way quotes, with bid-ask spread of N1. All transactions shall be cleared by a Central Counter Party (CCP).

“Reintroduction of Order Book to ensure transparency of orders and seamless execution of trades.

“The operational hours of trades shall be from 9am to 4pm, Nigeria time.

“Cessation of RT200 Rebate Scheme and the Naira4Dollar Remittance Scheme, with effect from 30 June 2023.

“Further guidance on these matters shall be communicated in due course. All market participants and the general public are kindly enjoined to abide by these rules.”