On Monday, February 5, 2024, the Naira saw gains against the dollar both at the official and black markets. This coincides with the Central Bank of Nigeria’s (CBN) announcement of plans to introduce a singular foreign currency (FCY) gateway bank to centralise all correspondent banking activities.
The domestic currency appreciated marginally by 1.10% to close at N1,419.86 to a dollar at the end of the business day, as per data from the Nigerian Autonomous Foreign Exchange Market (NAFEM), where forex is officially traded. This represents a gain of N15.67 or a 1.10% increase compared to the previous day’s closing rate of N1,435.53.
Throughout the trading day, the intraday high was recorded at N1,526/$1, while the intraday low stood at N906/$1, indicating a significant spread of N620/$1. Forex turnover at the close of trading amounted to $440.13 million, matching the previous day’s figure.
The recent rise in forex turnover follows the issuance of a new circular by the CBN aimed at addressing suspected cases of excessive foreign currency speculation and hoarding by Nigerian banks. The circular introduces guidelines to mitigate the risks associated with these practices, expressing concerns over the trend of banks holding large foreign currency positions.
Similarly, the naira closed with gains at the parallel forex market, with the exchange rate quoted at N1,455/$1, marking a 3.09% increase from the previous day’s rate of N1,500. Peer-to-peer traders quoted around N1,456/$1.
Key Points:
- The CBN is set to introduce a singular FCY gateway bank to centralize all correspondent banking activities, aiming to stabilize the forex market and enhance the management of Nigeria’s international financial transactions.
- Governor Yemi Cardoso outlined short and medium-term strategies for addressing Nigeria’s forex challenges, including establishing a Gateway Bank.
- Correspondent banking, currently dominated by two major banks in Nigeria, will undergo disruption with introducing a central gateway bank, ensuring more efficient and transparent financial operations.
- Efforts to strengthen surveillance and technological capabilities to monitor cryptocurrency transactions are also being intensified in response to the evolving landscape of digital finance.
