Traders seeking dollars and individuals in Nigeria are hopeful for improved conditions in the forex markets during the upcoming week. The Nigerian currency concluded the previous week on a negative note against the US dollar in both official and unofficial foreign exchange markets.
On Friday, August 23, 2023, the naira experienced a decline against the United States dollar in both the official and unofficial forex markets. These forex markets encompass the Parallel market, Peer-to-Peer (P2P) market, and Investors and Exporters (I&E) market, with the latter serving as the official foreign exchange platform.
In the parallel market, the naira depreciated against the dollar by N5, resulting in a selling rate of N915/$1 by the end of the previous week. Similarly, in the P2P segment of the unofficial forex market, frequently used by crypto traders, data indicates that the naira experienced a decrease of N4 against the US currency, with a selling rate of N915/$1. This is in contrast to the preceding trading day’s rate of N911/$1.
Within the Investors and Exporters window, the Nigerian currency weakened by N6.73 or 0.78%, trading at N778.42/$1 on Friday, August 23, compared to the exchange rate of N771.69/$1 on Thursday.
This movement transpired as forex dealings in the official window dwindled to $73.80 million during the final trading session, marking a significant decline of $47.80 million or 39.3% from the $121.60 million reported on Thursday. Additionally, according to data from the Central Bank of Nigeria (CBN), the naira held steady against the British pound Sterling and the Euro on Friday at N976.76/£1 and N504.64/€1, respectively.
Looking ahead to the new week, it is anticipated that the pressure on forex demand will persist, although indications point to the Central Bank of Nigeria intervening in the forex markets to curb the dollar’s exchange rate within the unofficial markets. In line with this, Reuters reports that the dollar retreated from a 12-week peak on Friday and is projected to continue its descent in the coming week.
Notably, the South African rand made modest gains against a weaker dollar in early morning trading on Monday, August 28. However, this scenario could change if the US Federal Reserve decides to raise interest rates this week, a move that often leads to a stronger dollar against other foreign currencies.
In a separate development, the Central Bank of Nigeria has introduced a new portal to counter malpractices in the foreign exchange market. Expected to go live by the conclusion of August 2023, this portal holds the potential to make a transformative impact if implemented effectively.