GAINS FROM N1,520 TO N1,400 NAIRA WHEN CBN ELIMINATED THE IMTOS FX CAP

With the removal of the FX cap from International Money Transfer Operators (IMTOs) and the Central Bank of Nigeria's (CBN) order for banks to sell excess dollars, Nigeria's currency is starting to make up ground against the US dollar on both the official and black market.

The value of the naira jumped by 8.57 percent in less than a day to N1,400 on Thursday, according to data gathered from multiple street vendors. On Wednesday, the parallel market, saw its peak value of N1,520 per dollar.

The CBN removed the cap on IMTOs, which was -2.5 percent to +2.5 percent. With this update, IMTOs will have signifying shift.

This is in response to limits placed on banks by the banking and financial institutions regulator on Wednesday. The regulator also expressed concerns about the rise on banks' balance sheets as a result of the local currency's depreciation against the US dollar.

The Nigerian Naira is now the most valuable and currency in Africa, according to the currency model created by FIM Partners.

Globally speaking, only the Japanese yen is less expensive. Charlie Robertson, head of macro-strategy at FIM Partners in the UK, says that Zambia, Venezuela, and Lebanon are not part of the model. One of the street merchants told BusinessDay that there are enough dollars on the market as a result of the CBN's new forex policy, and that demand has reduced because the Chinese, who are major users of dollars, are on vacation.

In a new circular (TED/FEM/FPC/GEN/001/003), the CBN announced on January 31, 2024, the regulations governing exchange rate quotes supplied by international money transfer firms.

IMTOs were to quote rates within an acceptable range of -2.5 percent to +2.5 percent of the Nigerian FX market, following the circular TED/FEM/PUB/FPC/001/009 dated September 13, 2023.

In keeping with the CBN's pledge to liberalize the nation's FX, the new for naira payout to beneficiaries based on current market rates in the Nigerian FX market. This is to be carried out based on willing sellers and willing buyers.

This circular (TED/FEM/PUB/FPC/001/009), signed by Hassan Mahmud, Director of the Trade and Exchange Department, replaces the one that was previously issued on September 13, 2023.

International Money Transfer Operators, and all licensed dealers take note of this change and ensure that the revised rules are met. The circular states that the CBN's choice is a result of ongoing efforts to modify the dynamics of the FX market in Nigeria. Aminu Gwadabe, the head of the Association of Bureau De Change Operators of Nigeria (ABCON), said, “removing the cap is to encourage the IMTOs to transfer their receipts into the country.” Instead of remitting the actual remittance proceeds into the official market, he said that up until now, the IMTOs have been domicileing them at rates lower than the parallel market.

With the easing of the cap, is believed that the official markets will be greatly reduced or abolished.

He believes that an increase in market liquidity, which stability, will be the most likely outcome. Gwadabe said, We have already started seeing that, from a N1520/$ yesterday to N1420/$ this afternoon in the market. The management of the top bank to keep up the pace. The speaker said that, third leg of the market, transmission mechanisms that need to be taken into consideration right away.

Commercial banks put dollars into the official market on Thursday in response to the CBN's 24-hour notice, which supported the naira's recovery and eased some of the pressure on the FX market.

The volume of dollar transactions between willing sellers and willing buyers—banks, exporters, and investors—increased by 85.36 percent, indicating this.

The FX market's daily turnover was recorded by the official market on Tuesday, at $72.33 million, and on Wednesday, at $134.07 million.

The 1.85% on Wednesday when the dollar was quoted at N,‪1455.59, as opposed to N1,482.57 on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to statistics from the FMDQ.

Furthermore, the intraday high on Wednesday rose from the N1,531 quoted on the spot-on Tuesday by 1.46 percent to N1,509. The stable intraday low was N789 per dollar.

Naira appreciation is the term used to describe a growth in the value of the Nigerian Naira in relation to other currencies, that imported goods may become more affordable, which may lead to a drop in the price of imported goods, have reduced production costs, especially if they import goods or raw materials. Analysts pointed out that businesses that rely on exports may face challenges because the cost of their products may rise for consumers overseas.