FX Market: Naira Continues Decline, Convergence with Official Rate Imminent

The naira edged lower to N1,470 against the dollar in the parallel segment of the foreign exchange (FX) market on Friday, signaling a convergence with the official exchange rate.

This latest figure reflects a 1.38 percent depreciation compared to the N1,450 recorded on May 8.

Bureau de change (BDC) operators, who are key players in currency trading, set the buying rate at N1,430 and the selling rate at N1,470, leaving a margin of N40.

Meanwhile, in the official FX market, the naira experienced a 0.45 percent decline to N1,466.31 on Friday, down from N1,459.73 on May 9.

According to data from FMDQ Exchange, the platform overseeing official FX trading in Nigeria, the naira reached a high of N1,490 and a low of N1,322.

The current discrepancy between the parallel and official rates stands at N3.69, as the dollar value in the parallel market surpasses that of the official window.

The Central Bank of Nigeria (CBN) recently revised its directive regarding the repatriation of export proceeds by international oil companies (IOCs). The new directive allows for the immediate pooling of the initial 50% of repatriated proceeds, with banks permitted to request cash pooling in advance, supported by necessary documentation.

Furthermore, the remaining 50% of repatriated export proceeds can now be utilized to settle financial obligations in Nigeria within a prescribed 90-day period.

This move follows earlier restrictions imposed by the CBN in February on the transfer of proceeds from crude exports by IOCs to offshore parent company accounts, aimed at stabilizing the FX market by managing liquidity.

The CBN has underscored the impact of IOC fund transfers on FX market liquidity, highlighting the need for measured reforms to address volatility.