The naira yesterday continued its recovery against the dollar on the parallel market after slumping to N460 to the greenback about two weeks ago.
As the Federal Government’s partial lifting of the COVID-19 lockdown in Lagos State, the Federal Capital Territory (FCT) Abuja commenced on Monday, the naira further appreciated to N430/$1 from N450 per dollar last Friday.
Analysts attribute the local currency’s recovery to the International Monetary Fund’s (IMF) approval of Nigeria’s $3.4billion loan request, as well as the Central Bank of Nigeria’s (CBN) announcement last Wednesday that it had resumed the provision of foreign exchange to all commercial banks for onward sales to parents wishing to pay schools fees and Small and Medium Enterprises (SMEs) seeking to make payment for essential imports needed to revive economic activities across the country.
Specifically, the CBN, citing the expected gradual easing of the Coronavirus lockdown, said it had resumed the provision of over $100 million per week for both categories of forex users, adding that it has also concluded arrangements to resume foreign exchange sales to the Bureaux De Change (BDC) segment of the market for business travels, personal travels and other designated retail uses, as soon as international flights resume.
The regulator stated that its resumption of forex sales to commercial banks for the use of the aforementioned categories of forex users underscored its commitment to adequately meeting the needs of all legitimate users, and that there was thus no need for any end-user to resort to illegal forex sources.
Commenting on the naira’s recovery in a note issued at the weekend, analysts at AZA said: “Increased CBN dollar supply and the IMF’s $3.4 billion emergency support under the Rapid Financing Instrument (RFI) halted the Naira’s slide. 12-month Naira forward rates pointed to 509 and the currency had weakened to a 3-year low of 460 per dollar in the parallel market, before reprieve to 450 by week’s end. Dollar liquidity eased with the CBN lifting a 14-day suspension on Bureau de Change dollar sales (partly to allow parents to pay offshore school fees and SMEs to meet essential import bills).
“A narrowing of the gap between the parallel and official rates will help Nigeria address the IMF calls for unification of exchange rates to curtail price arbitrage. We foresee further relief for the Naira in the coming days,” the analysts added.
