LAGOS—Pressure on foreign exchange rate eased, yesterday, as the interbank market recorded an unprecedented inflow of USD327 million with a single transaction of USD270 million by foreign investors.
This development drove interbank rate down to N305.5/ USD1, from last Friday’s closing rate of N314.95/ USD1. Governor, Central Bank of Nigeria (CBN), Mr Godwin Emefiele Bank treasurers said the development came as foreign investors lined up to buy local currency bonds in response to the attractive rates in the bonds market.
Hitherto, liquidity in the forex market was largely driven by supply intervention from Central Bank of Nigeria, CBN, to douse tension and control escalating exchange rate. Average supply volume hovered around USD50 million without CBN intervention, but yesterday, independent supply was in excess of USD300 million with minimal CBN inflow to moderate a relative higher rate on the independent funds.
Banks’ treasury executives also connected the development in the interbank forex market to CBN’s monetary policy strategy which has been driving up yields in government bonds and fixed income securities. Monday’s surge in volume of forex trade came on the heels of CBN’s announcement last Friday that it would offer N212.85 billion in treasury bills.
The offer which matures between 91 days and one year would open tomorrow. Parallel market still under pressure However, despite the improvements in the interbank segment, pressure was sustained in the parallel market segment with rates still at an average of N414/ USD1, worsening the parallel market premium (gap between parallel and interbank rates).
Banks’ forex dealers said the premium could only be narrowed by a sustained positive development at the interbank market over several weeks. In connection to this, CBN had been battling to bridge the gap for a long time now and pursuant to its earlier directive for the supply of foreign exchange to Bureau De Change (BDCs) operators, subject to a maximum of USD30,000 per operator per week, the apex bank increased the maximum amount to USD50,000