Dollar Supply Rises by 180% in FX Market as Banks Sell $440m

Dollar supply in the official foreign exchange market rose by 180.59 percent to $440.13m on Friday.

This is as the naira closed the week at N1435.53/$ on Friday after what was a turbulent week.

According to data from FMDQ Security Exchange, forex turnover rose by 180.59 percent to $440.13m on Friday from $156.86m on Thursday. However, aside from commercial banks, the Central Bank of Nigeria, oil firms and multinationals also sell dollars at NAFEM.

The improved liquidity is following moves by the Central Bank of Nigeria to stabilise the foreign exchange rate. Before closing at N1435.53/$ on Friday, the naira traded at an intraday high of N1526/$ and low of N838.96/$.

At the parallel market, on Friday, the naira closed at N1,420/$ with a steady demand for the greenback.

Last week, the apex bank rolled out new circulars and guidelines to boost liquidity and narrow the gap between the parallel and official rates of the foreign exchange market. In its most significant foreign exchange guideline, last week, the CBN ordered banks to adjust their FX exposures.

In its circular titled, “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks”, the apex bank expressed worry over the growing trend of banks holding large foreign currency positions.

It said, “The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”

The CBN mandated that banks’ NOP must not exceed 20 percent short or 0 percent long of the bank’s shareholders’ funds going forward. It gave a February 1, 2024 deadline to those who had exceeded its limit.