The Naira gained against the dollar on Monday, 5th February 2024 at the both official market and the black market.
This is just as the Central Bank of Nigeria (CBN) said that it is set to introduce a singular foreign currency (FCY) gateway bank that will centralize all correspondent banking activities.
The domestic currency appreciated marginally at the end of the day by 1.10% to close at N1,419.86 to a dollar at the close of business, data from the NAFEM where forex is officially traded, showed.
This represents an N15.67 gain or a 1.10% increase in the local currency compared to the N1,435.53 closed on Friday.
- The intraday high recorded was N1526/$1, while the intraday low was N906/$1, representing a wide spread of N620/$1.
- According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $440.13 million, the same as what it was closed the previous day.
- The recent rise in forex turnover was on the back of the Central Bank of Nigeria’s (CBN) recent release of a new circular to address suspected cases of excessive foreign currency speculation and hoarding from Nigerian banks.
- The new circular introduces a set of guidelines aimed at reducing the risks associated with these practices.
- The circular, titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” highlights the CBN’s concerns over the growing trend of banks holding large foreign currency positions.
- However, the naira also closed with a gain at the parallel forex market where forex is sold unofficially, the exchange rate quoted at N1,455/$1, an increase of 3.09% against N1,500 it closed the previous day, while peer-to-peer traders quoted around N1456/$1.
What you should know
Nairametrics reported that the Central Bank of Nigeria (CBN) is set to introduce a singular foreign currency (FCY) gateway bank that will centralize all correspondent banking activities.
The CBN Governor, Yemi Cardoso made this known in a TV interview on Monday where he also outlined short and medium-term strategies for fixing Nigeria’s forex challenges. Included in the medium-term strategy was the setting up of a Gateway Bank.
- “Introducing a single FCY gateway bank to centralize all correspondent banking activities, currently dominated by two major banks in the corresponding banking space.”
This initiative forms a critical part of the CBN’s medium-term strategy to stabilize the forex market and enhance the overall management of Nigeria’s international financial transactions.
This strategic move is accompanied by a broader scheme of reforms which the CBN has articulated as part of its overarching plan to improve the nation’s forex inflows and to stabilize the Naira.
According to Cardoso, Correspondent banking, which facilitates international trade and economic activities by enabling domestic banks to conduct business and provide services to their clients across borders, is presently under the dominion of two major banks within the Nigerian banking landscape.
However, it is unclear whether the two major banks mentioned are local or foreign and what the legal framework is for creating a gateway bank.
The creation of a central gateway bank is poised to disrupt this concentration, ensuring more efficient and transparent financial operations that align with global best practices.
The CBN Governor also mentioned that in response to the evolving landscape of digital finance, the CBN is also intensifying its efforts to strengthen surveillance and technological capabilities to effectively monitor cryptocurrency transactions.