The Naira gained some of its lost weight on Thursday as it traded for between N1400/dollar and N1420/dollar at the parallel market in Lagos, the commercial nerve centre of the country.
This was a huge rebound from over N1500/$ it sold on Wednesday.
The Naira fared even better in Abuja, where it exchanged at the parallel market between N1,300/$ and N1,350/$.
This followed a directive by the Central Bank of Nigeria (CBN) to all deposit money banks in the country to offload excess foreign exchange in their custody.
The apex bank gave the banks up to the midnight of February 1, 2024 to sell all excess foreign exchange holdings.
According to The Punch, many banks spent the entire day battling to sell their excess FX holdings.
The central bank believes some commercial banks hold long-term foreign exchange positions to enable them to profit from the volatile movements of exchange rates.
The new circular introduced a set of guidelines aimed at reducing the risks associated with these practices.
The circular reads in part: “The Central Bank of Nigeria has noted with concern the growth in foreign currency exposures of banks through their Net Open Position (NOP). This has created an incentive for banks to hold excess long foreign currency positions, which exposes banks to foreign exchange and other risks.”
The apex bank further directed banks with current NOPs exceeding its limits to adjust their positions and comply with the new regulations by February 1, 2024.
The latest circular came barely 48 hours after the CBN released a circular, warning banks and FX dealers against reporting false exchange rates, among others.
The new development came on the heels of the adjustment of the methodology used for the calculation of the nation’s official exchange rate by the FMDQ Exchange, a situation that has moved the official exchange to about N1,500 from around N900/dollar.
Following the latest CBN directive which is aimed at unifying the official and parallel market rates of the local unit, several banks sold forex to their customers on Thursday.
