Arbitrage activities were spotted in the parallel foreign exchange (FX) market after the Central Bank (CBN) adopted Nigeriaâs Autonomous Foreign Exchange for legitimate transactions.
In the currencies market, Chapel Hill Denham said the Nigerian local currency, naira gained in the investors and Exporters window by 0.12% or 12kobo on while in the parallel market, it shed 1.62% or N1.62.
The investment firm however said the decline in the parallel market is linked to arbitrage activities in which traders are creating artificial scarcity of the United States dollar in reaction to the convergence of the official and NAFEX rate on the CBN website.
Naira trades for N493 per dollar at parallel market tribuneonlineng.com - get the latest breaking news, showbiz & celebrity photos, sport news & rumours, viral videos and top stories from tribuneonlineng.com Daily Mail and Mail on Sunday newspapers.
Foreign debt accounts for more than 95% of Nigeriaâs external reserves after falling behind $35 billion mark due to lack of external inflows arising from weak foreign investors sentiment analysts said in a report.
While foreign debts level has increased further as a result of pandemic-induced fiscal stress, the Nigerian external reserve has plunged strongly to $34.7 billion as of May 2021 compared with $33.348 billion external debts.
Tumbling gross foreign reserve has however weakened the Nigerian central bank market intervention amidst scarcity of foreign currencies inflow into the economy.
Analysts told MarketForces Africa that CBNâs weekly intervention in the foreign exchange market has dropped, even after the economic lockdown has been lifted.