The naira fell to 351 to the United States dollar at the parallel market and slightly to 282 at the new interbank market on Monday. Following the floating of the naira and the adoption of a single structure through the interbank/autonomous window, the currency closed last week at 281 to the greenback at the official market.
The President, Association of Bureau De Change Operators of Nigeria, Alhaji Aminu Gwadabe, said the naira dropped to 351 at the parallel market from between 346 and 348 due to persistent liquidity issue.
He said, “Lack of liquidity in both the interbank and parallel markets is what is affecting the naira exchange rate to the dollar. Right now, the only thing that the market is scavenging for is the export proceeds. There is a liquidity crisis.”
Asked if demands have shifted away from the parallel market as a result of the new forex policy, Gwadabe said, “How can demand shift away from the parallel market when you have about 41 items that cannot obtain forex from the official market? You cannot completely kill the black market, you can only formalise it.”
The Central Bank of Nigeria, which has been intervening in the interbank market since it abandoned its peg of N197-199 to the dollar, asked for bid-offer quotes from currency traders on Monday as it sold dollars at the interbank market to boost liquidity, Reuters quoted traders to have said.
After abandoning the naira’s 16-month old exchange rate peg a week ago, the central bank sold dollars at an auction to clear a backlog of demand and keep markets active.
It sold an undisclosed amount of dollars on Monday. However, the interbank market traded a total volume of $32m just before the market closed, which traders attributed to the central bank’s intervention. The interbank market opened at 8am with no activity for more than three hours.
“Liquidity is still relatively thin,” one trader said, adding that clients were waiting to see where the naira settled eventually before they would begin to participate in the market. Currency traders on Monday said they had tightened the differential between bids and offers to N0.5 from one naira set when the currency was floated last week to try to boost trading and attract liquidity.
Prior to the old exchange rate peg, the currency market traded on N0.5 spreads, they said.
Nigeria’s interbank market has traded for six days after the central bank forex reforms. Traders are expecting substantial currency flows from oil companies and exporters to start to trickle in from this week, they said.