Naira strengthened marginally against the U.S. dollar at the Investors and Exporters (I&E) window of the foreign exchange (forex) market on Monday, closing at N386 to a dollar, compared to the N386.50 to a dollar recorded on Friday.
However, the exchange rate remained stable at the parallel market on Monday at N455 to a dollar, the same rate at which trade was conducted on Friday.
Forex turnover at the I&E expanded by 66.42% on Monday, giving a boost to liquidity in the currency market.
Turnover leapt from the $38.12 million reported last Friday to $63.44 million on Monday according to the data provided by FMDQOTC, the exchange where forex is traded by foreign investors and exporters.
Even though the increase in percentage terms is seemingly high, yesterday’s turnover at $63.44 million is well below the over $200 million daily average recorded in January.
Liquidity remains quite tight at the forex market with the average turnover in the I&E segment of the market down to around $45.5 million in May compared to January.
The backlog of forex demand in the market could be between $1.5 billion – $5 billion according to analysts as supply shortage persists.
Dearth of foreign exchange has been rife in the market since the oil price slump coincided with the coronavirus lockdown that disrupted supply chains.
The rise in forex demand and the contrasting fall in supply have triggered calls for a devaluation of the Naira, which the Central Bank of Nigeria said it had plans to implement. The last devaluation of the Naira occurred in March.
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