The exchange rate for import duties collection by the Nigeria Customs Service (NCS) has declined from N1,584/$ on the 22nd of July to N1,541/$ today representing a drop of N43.
The decline in the customs exchange rate comes on the heels of the recent appreciation of the naira on the official market.
Data from FMDQ reveals that the naira closed at N1,548 to the USD yesterday after closing at N1,564/$ a day earlier representing an appreciation of N16 in one day.
CBN intervention and increase in FX reserve
On Monday, the naira gained around N100 to the greenback due to the Central Bank of Nigeria (CBN) intervention by selling FX to licenced Bureau De Change (BDC) operators to the tune of $106 million last week. This saw the naira record the most gain since March this year when it appreciated from N1,596 to N1,500 on Monday.
The CBN explained that the reason for intervening in the forex market was due to a rise in demand from businesses and the expected seasonal rise in demand in the summer.
The CBN had earlier announced it is selling $20,000 each to eligible BDCs at the rate of N1,450- far below the official market rate then. The action mirrors a similar intervention by the apex bank earlier in March which saw the Naira become the best-performing currency in the world. The CBN was accused of burning the foreign reserve to defend the naira, an allegation the bank’s Governor would later deny.
Nigeria’s foreign reserve has increased dramatically on the back increase in diaspora remittances as the FX reserve soared to $37.05 billion on the 18th of July 2024. The CBN Governor noted that the current level of foreign reserve could cover 11 months of imports. This represents an increase of $2.35 billion from $34.70 billion at the end of June 2024.
Decisions of the Central Bank’s MPC
Yesterday, the Monetary Policy Committee (MPC) of the CBN further hiked interest rates by 50 basis points to total an 800 basis points increase this year. Mr. Yemi Cardoso, Chairman of the committee explained that the declined chasm between the official FX market and the parallel market reflects the impact of the monetary policy tightening efforts of the apex bank.
He stated, “The MPC noted the narrowing spread between the various foreign exchange segments of the market, an indication of price discovery and improved market efficiency, thus reducing opportunities for arbitrage and speculation.”
“The Committee noted that the increase in the level of external reserves would further build confidence for a more stable exchange rate and thus urged the Bank to explore available avenues to improve inflows, especially through diaspora remittances”