During the last three weeks, the parallel market currency rate has steadied at N570 and N575/$1. Contrast this with September, when the naira plummeted in the first two weeks of the month due to a spike in international oil prices.
As the CBN firmly enforced its ban on selling currency to BDCs, the dollar traded for N527 for $1 at the end of August 2021. Due to a lack of demand in Nigeria’s retail forex market due to the ban, the exchange rate deteriorated, falling by an average of N2.9 per day from September 1 until the central bank cracked down on the black market exchange rate website abokiFX.
In his monetary policy briefing on the 17th of September, Nigerian Central Bank Governor, Godwin Emefiele, shocked the financial world by accusing abokiFX of currency manipulation and suggesting that it benefitted by setting black market rates that artificially increased the price. It was decided to suspend currency rates displayed on the platform until the matter was resolved by website proprietors, who issued a press release categorically denying any illegality.
To help them estimate the exchange rate, most forex traders now use currency aggregation websites rather than BDC operators, offering inconsistent pricing. With abokiFX, everyone needs a standard to determine what a given currency’s pricing is. However, even though abokiFX claims to acquire its price from exchange rate operators, site visitors have no idea how the prices are established.
Exchange rate stabilizes
Nairametrics has recently tracked the black-market exchange rate and found that it has steadied since the infamous CBN MPR meeting on September 17, where the central bank accused abokiFX of manipulating currency exchange rates. That day, the currency rate was N564 to $1; it rose to around N577/$1 a few days later but has subsequently fallen around N572-N570/$.
However, there is no indication that this is related to AbokiFX’s decision to stop providing daily rates, as there could be other reasons for the recent stabilization of exchange rates. At the I&E window, for example, dollar turnover has increased significantly. A major part of the September demand spike may have been due to waning foreign tuition demand. In addition, the economy is in disarray, with relatively few people having the liquid assets necessary to engage in currency speculation. Oil prices are also rising, which could give the dollar reserves a short-term lift.