DESPITE A SHORTAGE OF NEW NAIRA, THE EXCHANGE RATE IS STABLE

As the lack of naira redesign continues in Nigeria, the exchange rate between the naira and the dollar has stabilized.

According to data from the FMDQ, the dollar was quoted at about N461/$1 at the Investors and Exporters (I&E) currency window, Nigeria's official FX market, year to date, it on a lower level than the N456.50 reported on December 23, 2022.

The dollar has traded at N461.50 to $1 for the past three trading days in the I&E window, commonly called the Nigerian Autonomous Foreign Exchange Fixing (NAFEX).

The local currency gained 0.27 percent (N2) reaching N752 per dollar as opposed to N754 that was settled on Tuesday in the so-called black market.

The naira has depreciated 1.86 percent (N14) so far this year, going from trading at N738 per dollar on the first trading day of the year to the current unofficial of N752/$1.

According to a dealer who sells dollars to importers, “Demand for the dollar has decreased as importers are not making more transactions since the scarcity of the new naira.”

The old naira notes will no longer be used after February 10, 2023, according to the Central Bank of Nigeria (CBN), which originally planned to phase them out by January 31, 2023. However, under intense pressure from the Senate, the CBN extended the deadline.

Uche Uwaleke, a professor of capital markets at Nasarawa State University, Keffi, said the effect of the redesigned naira policy on the exchange rate, stating that “the impact is likely to be positive since the currency redesign is meant to reduce currency in circulation, which should in turn reduce the amount of naira that is used to chase the dollar, especially in the parallel market.”

Aminu Gwadabe, national president of the Bureau De Change (BDC) Operators Association of Nigeria, stated that “on the exchange front, the market levels have stabilized over the period of N740/N750 bid the greenback.” He continued by stating that the market's liquidity is still low due to strong demand pressure.

According to Gwadabe, the CBN is moving all transactions online, particularly with the introduction of the Afrigo national domestic to do away with the dominance of visa and master cards in the payment industry.

To improve inclusivity, he said, targeted initiatives like no cash withdrawals over the counter, only ATMs, and POS.

He claims that there are several lines at bank ATMs across the country as a result of unforeseen obstacles to small traders and beyond.

Godwin Emefiele, has ordered deposit money institutions to begin providing customers with over-the-counter payments of new naira with a daily cap of N20,000.

According to Gwadabe, the CBN took close look at the BDCs' spreads and use them to include and distribute AfriGo card domestic national card payments.

There is a need for concerted efforts to prepare, collaborate, and implement evidence-based solutions to volatiles, according to Gwadabe. “Already we are facing the hegemony of crypto currencies,” he added.

The government's long-term foreign currency and local currency issuer ratings, as well as its foreign currency senior unsecured debt ratings, were all downgraded last week by Moody's Investors. The country's outlook was also changed from positive to stable.