On Wednesday, the Nigerian currency continued to fall against the dollar, hitting a fresh all-time low on the parallel market in Lagos.
Despite rising forex reserves, the naira has been steadily declining since the beginning of this month, owing to the country’s ongoing foreign exchange scarcity.
On Wednesday, the naira lost value versus the US dollar in both the parallel market and the Investors’ and Exporters’ FX window.
The local currency, which was 526/$1 at the end of last month, dropped to 535/$1 on Wednesday in the parallel market, down from 532/$1 on Tuesday. Since August 4, when it ended at 506/$1, it has lost 5.73 percent of its value.
On the parallel market, the naira fell to 730 against the British pound sterling from 727/£1 on Tuesday, while the euro rose to N629 from N626.
According to FMDQ Group, the naira fell 0.20 percent to 411.50/$1 in the I&E window on Wednesday.
According to Financial Derivatives Company Limited, this window trades between 55 and 60 percent of Nigerian forex transactions. It is used by the Central Bank of Nigeria, as well as most exporters and investors.
It acts as a gauge for gauging potential and current CBN intervention in the market, as well as a source of price discovery. Balance of payments, capital inflows, and trade balance are some of the exchange rate factors, according to the FDC.
According to CBN data, the country’s FX reserves have climbed steadily since August 25, gaining almost $1 billion in just 13 days.
The reserves, which had dropped to a record low of $33.09 billion on July 12, had risen to $34.49 billion as of September 6, the highest level since May 14, according to the statistics.
After dropping to 525/$1 on the parallel market on July 28, a day after the CBN halted selling foreign exchange to Bureaux de Change, the naira strengthened to 506/$1 on August 4.
Mr. Godwin Emefiele, the Governor of the Central Bank of Nigeria, announced the suspension of forex sales to BDCs on July 27 at the end of the Monetary Policy Committee meeting, claiming that they had become “agents that facilitate graft and corrupt activities of people seeking illicit fund flow and money laundering in Nigeria.”