The Nigerian naira recorded a gain of 0.66% on the parallel market, often referred to as the black market, following the commencement of a new foreign exchange (FX) rule by the Central Bank of Nigeria (CBN) on Monday, July 1.
The naira was quoted at N1,510 per dollar on the black market, improving from the N1,520 quoted on Friday.
This data, gathered from street traders and various online data platforms, highlights a positive response to the CBN’s latest policy change.
One street trader attributed the naira’s gain to a reduction in dollar demand by end-users, coupled with an improved supply of the currency.
“We saw less frantic buying of dollars today, which helped the naira to strengthen. But it’s hard to say if this trend will hold,” he commented.
The recent policy shift by the CBN involves the discontinuation of its Price Verification System (PVS) Portal, a move effective from July 1, 2024.
The PVS Portal was initially launched to ensure that the prices of goods and services for foreign exchange transactions were accurately verified, preventing over-invoicing and under-invoicing, and thereby promoting fair pricing in Nigeria’s import and export activities.
In a circular issued by W.J. Kanya, acting director of the Trade & Exchange Department, the CBN referenced the previous circular dated August 17, 2023, which had announced the “Go-Live” of the PVS Portal.
The new directive stipulates that all applications for Form ‘M’ will no longer require a price verification report from the PVS Portal, effectively streamlining the process for authorized dealer banks and the general public.
This policy change aims to reduce the procedural burdens associated with foreign exchange transactions, potentially leading to a more efficient and fluid market.
Stakeholders in the banking and finance sectors are advised to take note of these changes and adjust their procedures accordingly.
The immediate impact of this policy shift has been a welcome relief for the naira, which has been under significant pressure in recent months.
However, experts and market participants are adopting a wait-and-see approach to determine if these gains can be sustained over the longer term.
“The CBN’s decision to scrap the PVS Portal could indeed simplify the forex transaction process, but we need to see consistent policy implementation and supportive measures to ensure these gains are not just temporary,” noted a financial analyst.
As the new system takes effect, further guidance and updates from the CBN are anticipated.
The financial community is closely monitoring the situation, hopeful that this move will contribute to greater stability and resilience in the Nigerian foreign exchange market.