After banks followed the Central Banks of Nigeria’s new guidelines, foreign exchange inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) increased last week by 66.7% to $2.2 billion.
The plentiful supply was insufficiently buoyant, though, as the naira’s value fell by 2.3%.
In an attempt to increase liquidity and reduce volatility in the foreign exchange market, the CBN released a number of circulars and guidelines that included new macroprudential limits for net open positions as well as the removal of restrictions on the exchange rate quotes provided by International Money Transfer Operators (IMTOs).
The amount of money coming into the NAFEM window—also referred to as the Investors and Exporters (I&E) window—rose to $2.2 billion by the end of last week.
With trades completed between N830 and N1,550 to the dollar in the official window, the value of the naira at the I&E window fell by 2.3% to end the week at N1,469.97 to the dollar.
According to the Cordros analysts, the CBN’s revised policy restricting banks’ foreign exchange exposure will sustain NAFEM turnover and enhance supply to the market in the near run, which will keep pressure on the local currency strong.