The Nigerian currency, the Naira, on Wednesday appreciated slightly to close at N390 per US dollar against 392 traded a day before at the parallel market, even as the Central Bank of Nigeria (CBN) offered $150 million on the spot and forward markets yesterday.
The apex bank has been intervening on the currency market since February in a bid to boost dollar liquidity and narrow the spread between official and black market naira rates.
However, the local currency at the official spot window depreciated to 306.25 compare to 305.85 sold per dollar on Tuesday.
Also, the naira whose appreciation on Tuesday stood at 491 against the Pound dropped on Wednesday to 500, while the Euro declined by five points to exchange at 425.
At the interbank market, the naira traded at 315.38 to a dollar, while exchanged at 407.59 per pound and 344.23 to the Euro.
Meanwhile, the CBN through its spokesperson, Isaac Okorafor, has explained why it was necessary for the apex bank to create several exchange rates in the forex market. According to Reuters, Okorafor, said that the multiple exchange rates are the only way forex liquidity could be maintained while simultaneously allowing investors to trade their own dollars at a more market-determined rate.
The CBN opened yet another window for investors and analysts this week, a move which effectively created another exchange rate, in addition to the existing five rates already in the market. The window which has begun trading also has the CBN as a participant.
However, the CBN has come under severe criticisms from international economists and analysts, who deride the multiple exchange regime, currently in place in the country, with many remaining skeptic about the sustainability of the CBN’s interventions.
Most prominently, the International Monetary Fund has urged CBN to scrap its multiple exchange rate regime to revive its economy, which is still quivering in recession.
Also, analysts continue to question the efficacy of the current methods the CBN is using, to draw inflows into Africa’s biggest economy as it masked pressure on the naira with the regulator trying to avoid a devaluation.
Last month the central bank cut the amount of paperwork small firms require to buy dollars, to improve the ease of doing business and help narrow the gap between official and black market exchange rates.
The lenders were meant to sell dollars bought from the central bank to small firms to enable them import eligible finished and semi-finished goods but they declined, spokesman Isaac Okorafor said in a statement.
Okorafor said the regulator took action based on field reports which showed that only eight lenders sold foreign exchange to small firms since the start of the window in April. Nigeria has 22 commercial lenders.
He said the bank has used the convoluted system to eliminate “frivolous demand” for foreign currency.
“The action will be lifted immediately any of the affected banks show evidence of significant utilization of the fund allocated to them under the SME window,” he said.
The naira was quoted weaker on Wednesday at an investor trading window, at 382.33 per dollar, data from market regulator FMDQ OTC Securities Exchange showed. The official market rate was 305.80 and the black market rate 391.
Okorafor said the bank sold a total of $196.2 million into the currency markets on Tuesday, including $52 million to small firms and $44.2 million to individuals with certain foreign expenses such as school fees and medical bills.

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