The Monetary Policy Committee (MPC) of the Central Bank of Nigeria (CBN) has attributed the recent volatility in the foreign exchange market leading to the recent depreciation of the Naira against the dollar to “seasonal demand” for the greenback.
The CBN Governor, Yemi Cardoso, speaking on behalf of the committee during the Monetary Policy Committee (MPC) meeting on Tuesday, stated that such volatility is observable in any functioning foreign exchange market globally.
According to Cardoso, the CBN is committed to maintaining a transparent FX market through a willing-buyer, willing-seller model, noting that the depreciation is merely a reflection of the interplay between demand and supply.
“Members further observe the recent volatility in the foreign exchange market attributing this to seasonal demand—a reflection of the interplay between demand and supply in a functioning market system,” Cardoso said.
Backstory
Recently, the Naira has seen a reverse in gain against the dollar in the official and parallel markets falling below N1500/$1 at some point.
For instance, the exchange rate between the naira and the dollar reached an intra-day high of N1,515 last Monday, according to data from FMDQ, where currencies are traded officially.
The last time the Intra-day high surpassed the N1,500 mark was on March 21, 2024, when it closed at N1,598/$1. Since then, it has traded below N1,500.
However, the naira reported a rebound above N1,500/$1 this week.
At the parallel market, the naira strengthened significantly, trading at N1,490 per dollar. The naira appreciated by 1.34% from the N1,510/$ value seen on Friday.
What BDC Operators are Saying
On their part, a senior official of the Association of Bureau De Change Operators (ABCON), who chose to remain anonymous, shared with Nairametrics insights into the ongoing depreciation of the Naira, stating that a lack of supply was a major factor causing the depreciation.
The ABCON official emphasized that the central role in the depreciation lies not with the BDC operators but with the diminished dollar allocations from the CBN.
“The CBN last provided dollars to only about 30% of licensed operators,” he explained, highlighting the challenges this poses for the rest.
“With insufficient allocation from the CBN, BDCs are compelled to source dollars at higher rates from the parallel market, which significantly impacts the rates they offer to customers,” he said.
In case you missed it
Nairametrics recently reported that CBN raised the benchmark interest rate by 150 basis points to 26.25% from 24.75%.
The Governor of the CBN, Cardoso, stated this at the press briefing following the 295th MPC meeting of the bank.
Furthermore, the bank retained the Cash Reserve Ratio (CRR) of Deposit Money Banks (DMBs) at 45% and put the Asymmetric corridor around the MPR at +100 and –300 basis points.