Data from the Investor & Exporter window of the Financial Markets Dealers Square (FMDQ) shows that the Naira appreciated by 33 kobo at the close of trading yesterday from ₦306.67k to ₦307. Data shows that the volume of dollars traded in the window which rose to $114.07m from $104.07m was responsible for the depreciation in the value of the Naira
The Nigerian Autonomous Exchange Rate Fixing is a foreign exchange dealers window (NAFEX) for exchange rate fixing between the Naira and other major foreign currencies mostly traded as pairs. The 11% rise in the demand by investors and exporters in the I & E window drove up the value of the dollar against the naira which led to a depreciation of the local currency. The rise in the value of the dollar has pushed the parallel market to ₦365 per dollar at a time when Nigerian families are ramping up FX for Christmas holidays and oversees shopping.
The Central Bank of Nigeria maintains a fixed exchange rate band, a limited range of +-₦3 within which the currency is not allowed to float without the intervention of the apex regulator. Between the end of 2014 and March 2017, the naira dropped from ₦165 per dollar to ₦510 to a dollar, this was majorly caused by a drastic drop in the prices of crude oil from $110 per barrel to as low as $28 per barrel at its worst which crashed the monthly oil receipts revenue to the federation account from $2.5bn to $400m and led to a lot of round tripping of the currency by speculators, a massive capital flight by investors who were not exactly sure of the future of the currency given the over dependence on crude oil revenues and the bleak future of the global oil market.
The conversion from the Wholesale Dutch Auction system (WDAS) and a corresponding increase in the weekly supply of dollars to the interbank market from $150m to $500m has stabilized the parallel market rate at ₦365 to a dollar and is guaranteed supply of the greenback for importers, travellers demanding for school fees, medical fees, shopping allowance from the market.