The Nigerian naira experienced depreciation to N910 to a dollar on the parallel market, compared to N850 on the previous day. On the official Investors and Exporters’ (I&E) FX window, the naira also closed lower at N770/$1, compared to N761/$1 on the previous trading day. The widening gap between the rates on the parallel market and the official window is causing concerns.
In response to foreign currency (FCY) risk and to preserve liquidity in the foreign exchange market, the Central Bank of Nigeria (CBN) has directed financial institutions under its regulation to stop granting FCY secured naira overdrafts. The central bank warned that such practice could lead to currency mismatch, limit FX liquidity, create scarcity, and pressure the exchange rate. Banks have been given two weeks to replace FCY collateral on existing overdrafts with other acceptable asset types.
In addition, the Nigerian Exchange Limited (NGX) is considering listing dollar-denominated bonds to facilitate ease of access to foreign exchange. This initiative is targeted at companies operating in special economic free trade zones and those earning foreign currency. The CEO of NGX also emphasized the need for fiscal incentives for listed corporates and engagement with the government to address challenges related to wealth creation and revenue generation.
The Nigerian government and regulatory authorities continue to take measures to manage FX liquidity and stabilize the exchange rate amid market uncertainties and external pressures.