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CBN warns forex dealers as naira plunges to N1,482/$ at official market

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Rising FAAC allocations worsen naira crisis

The Central Bank of Nigeria (CBN) on Tuesday, released a circular to authorised dealers on financial market price transparency, warning them against engaging in sharp practices.

The warning came as the naira collapsed at the official window on Tuesday, closing at an all-time-low of N1,482 against the dollar

The local unit had closed at 1,348 against the greenback on Monday after the FMDQ Security Exchange review the methodology used for the calculation of its rates.

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The apex bank in the circular, noted that that its attention had been drawn to the practice of some dealers and their customers in reporting inaccurate and misleading information on transitions in the financial market.

According to it, ‘the behaviour was not compliant with ethical standards, and deliberate attempts to create price distortions by reporting false transaction details amounts to market manipulation which will not be tolerated and henceforth face sanctions.’

The naira fell further on Tuesday, dropping to N1482.57/$ as of the end of trading.

Earlier on Monday, FMDQ Securities Exchange, which calculates the exchange rate of the country, revised the methodology used to set the exchange rate. This some experts believe is a technical devaluation of the national currency.

In a market notice, FMDQ stated, “This revision aims to address recent fluctuations and challenges encountered in the Nigerian Foreign Exchange (‘FX’) Market.”

It noted that the new measures taken would ensure that NAFEX and NAFEM rates accurately reflect market conditions.

“These revisions are focused on enhancing the accuracy and reliability of the NAFEX and NAFEM rates determination process, with a focus on data availability and integrity involving a rigorous data validation process, including tolerance checks which shall be applied by FMDQ Exchange, subject to internal policies and procedures,” it explained.

These moves by FMDQ and CBN were aimed at closing the gap between the official and parallel rates of the foreign exchange market. The NAFEM rate closed at N1348.63/$ on Monday, a lot closer to the parallel rate which closed at N1,450/$.

On Tuesday, the naira closed at N1482.57/$, a 9.93 per cent decline from its Monday rate. On the parallel market, it remained stable at N1,450/$ on Tuesday. On the cryptocurrency peer-to-peer market, the naira was trading for N1,439.5/$ on Binance’s P2P platform as of the time of filing this report.

 

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