Foreign Exchange Market Records Decline in Dollar Sales by Deposit Money Banks

On Friday, the Nigeria Autonomous Foreign Exchange Market saw a $252 million decline in dollar sales by Deposit Money Banks and other entities, to $84.1 million.

This is a 74% decrease from the $331.1 million in transactions that were registered at the official Nigeria Autonomous Foreign Exchange Market on Thursday.

In the meantime, at the official market, the value of the naira dropped to N1,537/$ on Friday from N1,498/$ at the end of trading on Thursday.”From $336.11 million on Thursday to $84.10 million on Friday, there was a 74% decline in forex turnover, according to an analysis of data from FMDQ Security Exchange. Nevertheless, the Nigerian Central Bank, oil companies, multinational corporations, and commercial banks are not the only entities that sell dollars at NAFEM.

Alongside a consistent demand for the US dollar, the naira’s value at the parallel market fell on Friday, from N1,600/$ on Thursday to N1,670/$.

The supply began the week at a low of $116.11 million on Monday; on Tuesday, it rose by $292.3 million to $381.92 million, but on Wednesday, it fell to $117.87 million, according to additional analysis with the week ending. The amount supplied rose to $336.11 million on Thursday.

Experts in the market suggested that the depreciation of the naira was caused by speculators and people who were travelling for business, pleasure, education, and medical reasons.The demand for the US dollar might not go away anytime soon, according to currency dealers.

According to the FMDQ report, banks induced third parties to sell $1.97 billion during the first week of the CBN circular, which required banks to adhere to new FX prudential guidelines thresholds.

Deposit Money Banks were instructed to sell their excess dollar stock by the CBN in a set of guidelines.

Lenders were also cautioned not to hoard excess foreign currencies in order to make money.The top bank issued new regulations on Thursday that prevented banks from giving their clients Personal Travel Allowance.

It also requested that International Oil Companies refrain from immediately repatriating all of their earnings to their parent companies in a second circular, which was signed by Hassan Mahmud, Director of the Trade and Exchange Department.

In the third circular, the apex banks also reexamined their policies to prevent under- and over-invoicing of imports and exports.

However, difficulties in the forex market still exist despite the Central Bank’s efforts to increase the supply of foreign exchange through a variety of policy interventions.

There are worries regarding the possible resurgence of round-tripping activities as the difference between the rates in the official market and the parallel market is once again growing.

Banking organisations and IMTOs have started the implementation process in response to the circular, implementing operational changes by notifying their clients in order to accommodate the revised remittance framework.