The foreign exchange (FX) market auction conducted on Wednesday at the investors and Exporters (I&E) forex window recorded N551 per dollar bid, highest ever since the introduction of the window in 2017.
Most currency dealers who participated at the foreign exchange market auction on Wednesday maintained bids between N460.00 (low) and N551 (high) per dollar.
“They did that to enable them to get spot FX allocation (immediate FX allocation) in order to reduce finance cost for their business,” Ayodele Akinwunmi, relationship manager, corporate banking at FSDH Merchant Bank Limited, said.
Uche Uwaleke, professor of Capital Market at the Nasarawa State University Keffi, said, the naira scarcity occasioned by currency redesign resulted in currency substitution and higher demand for dollars.
He said higher inflation rates are to be expected in the coming months.
At the I&E FX window, Nigeria’s official foreign exchange market, Naira appreciated by 0.11 percent as the dollar was quoted at N461.50 on Wednesday as against the last close of N462.00 on Tuesday, data from the FMDQ indicated.
The foreign exchange market turnover, which reflects the level of activity at the I&E window, recorded $62.67 million on Tuesday.
At the parallel market, also known as black market, naira strengthened to N745 per dollar, gaining N1 over N746/$ traded on Monday.
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Muda Yusuf, chief executive officer The Centre for the Promotion of Private Enterprise (CPPE), said the sharp depreciation of the naira exchange rate in the parallel market remains a cause for concern.
He said it is a trend that should not be allowed to continue and all necessary steps need to be taken [and urgently too] to stem the slide and volatility.
“These developments should not be ignored. It is as much of an issue to consumers as it is to producers and other stakeholders that create value in the economy. It calls for an urgent review of the current foreign exchange policy.
“My proposition is that we should adopt a flexible exchange rate policy regime. Let me clarify that this is not a devaluation proposition. Rather it is a pricing mechanism that reflects the demand and supply fundamentals in the foreign exchange market. It is a model that is sustainable, predictable and transparent. It is a policy regime that would reduce uncertainty and inspire the confidence of investors. It is a policy framework that would minimize discretion and arbitrage in the foreign exchange allocation mechanism,” Yusuf said.