Banks begin to show investors naira quotes

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Image result for Banks begin to show investors naira quotesDeposit Money Banks have started showing investors price quotes for the naira on screens instead of giving them by phone, traders have said.

The move is part of an effort to draw dollars back to the nation’s ailing economy, which has been short of dollars since the price of crude oil, the main source of hard currency, plunged three years ago.

The Central Bank of Nigeria hopes the move will further narrow the spread between the official and black market rates by attracting more investment with higher transparency, traders said, according to Reuters.

Market operator FMDQ Securities Exchange initiated the change with an email on Monday, citing the need to improve liquidity. Trading by phone will also continue, traders said.

“This will ensure rates distortion on the FX market is considerably minimised, serving to improve and maintain the credibility of the Nigerian FX market,” FMDQ said in the email seen by Reuters on Thursday, adding that the move would start immediately.

Banks quoted the naira as weak as 371 to the dollar on the investor window on Thursday, Thomson Reuters data showed, but some were exchanging the dollar at N315 among themselves, traders said. Investors exchanged the naira at 400 to the dollar in May.

The naira has recovered some ground in recent months as oil revenues improved, after reaching a record low of 520 to a dollar. On the official market, the naira ended Thursday at 305.55, the rate where the central bank has kept it through regular dollar sales since last August.

Nigeria had at least five exchange rates, which it has used to mask pressure on the naira. The CBN has been working to converge the rates through interventions, but the dollar sales are burning through its reserves.

In April, it allowed investors to trade the naira at rates determined by the market, a move intended to improve dollar supply, but one that introduced yet another exchange rate.

The bank has said the investor window had handled $2.2bn of trade since April. However, it accounted for almost 30 per cent of that trade itself as it worked to keep the window operating.

The central bank last year lifted a temporary peg on the currency, but to protect its precariously low foreign reserves it introduced a convoluted exchange rate system that sees different buyers paying various rates for dollars.

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