The local currency recorded an N27/$ loss at the official
market weaker than N741/$ it closed on Monday.
Market reports showed the naira exchanged at N770/$ at the
parallel markets, leaving N2 gap for full rate convergence between the official
and parallel market rates.
According to a report from FMDQ Exchange, cumulative
transaction turnover at the I&E Window stood at $88.68 million on Monday.
Tuesday’s data is yet to be released.
Analysts also said that Monday’s low closing rate at the
I&E window attracted forex buyers interested in getting the greenback at
cheaper rates to that segment of the market.
The Central Bank of Nigeria (CBN) unified all exchange rates
into the I&E window and allowed market forces to determine exchange rate
for the naira.
Managing Director, Economic Associates, Dr. Ayo Teribe, said
the Bureau De Change (BDC)/ parallel market rate is the reliable indication of
market realities, and it is stable.
“The volatile price correction in the I&E rate should
trigger equally strong reduction in demand plus an increase in supply in that
window. That would make the market settle back towards equilibrium in the next
few days. I expect the rates to strengthen across all windows before the end of
this week. I expect the unified rate to move towards N600/$ or stronger in the
next week or so,” Teriba said.
Managing Director, Financial Derivatives Company Limited,
Bismarck Rewane, explained that in continuation of the fundamental reforms in
the forex market, the CBN, announced the relaxation of the domiciliary account
restrictions. Hitherto, cash deposits and withdrawals were limited.
He said the adoption of a single exchange rate and the
“willing buyer-willing seller model” by the CBN is, no doubt, cheery news for
the market.
He said the new exchange rate framework is expected to
increase transparency in the forex market, reduce exchange rate misalignment
and transaction costs, and buoy investor confidence.
“However, exchange rate management goes beyond exchange rate
unification. It must address issues surrounding market structure, easy access and
adequate supply. This means effectively dismantling forex rationing,
administrative controls, and reviewing import restrictions. As Barack Obama
declared, “Africa doesn’t need strongmen, it needs strong institutions,” Rewane
said.
President, Association of Bureaux De Change Operators of
Nigeria (ABCON), Dr Aminu Gwadabe, said all eligible forex demands are now
queuing at the I&E window in the short run hence the high transaction
traffic there.
“The development is not new as there were times when official
exchange rate was higher than the parallel market rates in China. The interplay
of supply and demand forces and the concept of willing buyer and willing seller
will eventually lead to a stable market clearance rate as events unfold,” he
said.