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.
A top bank executive, who spoke on condition of anonymity, said
that the new circular would force banks to sell about $5bn.
One top banker said, “Just as some Nigerians prefer to keep
their money in dollars because the naira is not a good store of value, banks
also hold excess dollar liquidity to make gains. They do their own at the
institutional level.
“What the CBN is saying with this new circular is that you
cannot hold excess dollar liquidity again. Any foreign exchange you are holding
must be committed to something, a transaction, or an obligation you can prove.
Banks have made a lot of revaluation gains. Some banks, I believe, got approval
under the last administration to hold more dollars than the requirement. The
idea is that if banks sell all these excess dollars, there will be liquidity
and the exchange rate will stabilise. Foreign investors will come in.”
According to a report on Friday, the banks were working to
meet the CBN’s new requirement.
Meanwhile, on Friday, S&P Global Ratings affirmed its
‘B-/B’ long- and short-term foreign and local currency sovereign credit ratings
on Nigeria. It also affirmed its ‘ngBBB+/ngA-2’ long- and short-term Nigeria
national scale ratings and maintained a stable outlook for the country.
According to the global rating firm, the stable outlook is
based on the government’s capacity to continue its reform agenda, which, if
delivered, would support growth and fiscal outcomes.
One of the firm’s projections is that costlier imports and
the clearance of FX arrears will limit the rise in the country’s FX reserves.