Exchange rate at risk of crossing N600/$1

Exchange rate at risk of crossing N600/$1

Naira to dollar exchange Nigeria’s exchange rate risks surpassing N600/$1 at the unofficial FX market as foreign investors who were paid dividends for the 2021 financial year seek to repatriate their earnings.

Naira currently trades at a record high of N588/$1 at the black market, as demand pressure continues to drive the rate higher. Similarly, at the peer-to-peer market exchange is currently trading at N583/$1 according to information gathered by Nairametrics team.

However, Naira stands the risk of further depreciation, following dividends declared by major corporations in the local equities market to their shareholders, which also involves foreign investors who would want to repatriate their funds.

Major corporations like GTCO, Zenith Bank, Dangote Cement, Lafarge Africa, Access Bank, Nigerian Breweries, MTN Nigeria amongst others have all declared final dividends in naira for their 2021 financial year, while Seplat Petroleum declared a dividend per share of $0.075. It is worth noting that some of these dividends have been paid in March, others are to be paid in April and May 2022.

Meanwhile, most of these dividends declared are paid in the local currency, which means that foreign investors who wish to take home their returns or earnings will have to exchange them for dollar, further driving the rate higher.

This is compounded by the decline in FX inflows into the country. Recent data released by the National Bureau of Statistics reveals that Nigeria’s capital importation declined to its 5-year low of $6.7 billion in 2021. The decline is attributed to the significant drop in both direct and portfolio investments.

A major glance at the NGX foreign portfolio report showed that foreign transactions on the local bourse dropped by 40% to N424.5 billion from N729.2 billion recorded in the previous year. In the same vein, FPI contribution to the total trade on the NGX also dropped from 33.63% to 22.88% in the review year. What BDCs are saying

In a discussion with Bureau De Change operators in Lagos State, they told Nairametrics that the coming election in 2023 is already having an effect on the FX market, as demand for forex has surpassed supply, which has further affected the exchange rate.

According to Abdulai, he explained that politicians and stakeholders are now buying and keeping FX for their campaigns for next year, which has affected the liquidity in the market, with supply not improving.

Similarly, Anwal Usman a BDC operator in Lagos also stated that the volatility in […]

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