The US dollar experienced a significant decline of 6.45 per cent, reaching N1,450 on the parallel market, commonly known as the black market, following the Central Bank of Nigeria’s (CBN) decision to raise its benchmark interest rate on Tuesday.
The CBN increased its Monetary Policy Rate (MPR) by 400 basis points to 22.75 per cent, up from 18.75 per cent in July 2023.
As a result, the Naira appreciated by 6.89 per cent, with the US Dollar crashing to N1,450 on Wednesday, compared to N1,550 on Tuesday in the black market.
The official foreign exchange (FX) market has not yet reflected the impact of the interest rate hike, as the Naira depreciated by 2.04 per cent against the dollar, quoting at N1,615.94 on Tuesday compared to N1,582.94 on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from FMDQ.
Tuesday’s spot trading saw a slight strengthening of the intraday low to N1,300 from N1,301 per dollar and a decline in daily FX market turnover to $154.16 million from $166.58 million on Monday.
The intraday high had strengthened to N1,778 per dollar from N1,805/$1 on Monday.
Bureau De Change (BDC) operators have yet to receive their dollar allocation from the CBN as of Wednesday, although about 785 BDCs have been listed for approval.
A circular released by the CBN on Tuesday states that it will sell $20,000 per week to each BDC at a rate of N1,301/$.
A margin of no more than 1% over the purchase rate from CBN may be charged to BDCs when selling to end users.
Following its meeting on Monday and Tuesday, the Monetary Policy Committee (MPC) took a number of actions, including raising the MPR, modifying the asymmetric corridor, raising the Cash Reserve Ratio, and keeping the Liquidity Ratio.
Yemi Cardoso, the governor of the CBN, expressed confidence that the reforms, including the unification of the foreign exchange market, will yield positive outcomes in the short to medium term.
He said the reforms also include the removal of limits on margins for International Money Transfer Operator (IMTO) remittances, the introduction of a two-way quote system, and broad reforms in the BDC segment.
