The naira appreciated by 1.86%, closing at ₦1,572.86 per US Dollar at the official market. This has widened the gap between official and parallel market rates to ₦23 as parallel market rates declined.
The naira reclaimed value in the forex market as demand undercut foreign currency supplied at Nigeria’s autonomous Foreign Exchange market.
According to FMDQ platform, the spot rate appreciated to ₦1572, trading below the #1600 range for the first time in March amidst expectations that the local currency will recover from excessive weight loss.
As a result of the absence of the central bank to influence the exchange rate direction, the exchange rate movements to the positive side has been slowed. Nigeria is not giving up without a fight on large forex that passed through Binance. Influenced traders had had a run on foreign exchange due to steep demand for US dollars.
The Central Bank is looking to obtain information about top traders on the Binance crypto peer-to-peer platform. The court has granted a request that Binance who has been under surveillance to make available the list of its top customers in Nigeria for perusal.
The central bank claimed that Binance became a conduit where some Nigerians converted local currency to US dollars for trades that failed to pass through the financial system. The FX whales may face prosecution if found wanting in the shadow economic game that plunged the naira into trouble.
The CBN estimated that more than $26 billion was transmitted via the peer-to-peer platform in one year, causing demand for the US dollar to rise faster amidst excess cash in the system.
To reduce cash levels in the economy, the apex bank embarked on aggressive mopping up with large ticket treasury and open market operations bills sales that attracted both local and foreign investors. The increase in short term borrowing instrument sales comes with higher interest rates offered to market participants who parted with naira for papers.
Analyst said, but despite all the efforts to achieve market clearing rates, the naira has been moving range bound. Traded above ₦1600 is against market expectations.
Since the naira was floated, the CBN market intervention has reduced significantly, far below the pre-pandemic support level to boost FX liquidity at the official window. For the exchange rate to recoup losses sustained due to spurious demand, analysts said there is a need to ensure there is enough FX market supply.
“The naira is under pressure because the demand and supply side are not balanced. If there are more US dollars at the official window than what is needed to pay offshore bills, the exchange rate will bounce back,” analysts said.