Exchange Rate Archives — Business Bells

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Tag: Exchange Rate

  • International Travel Tickets To Rise As Travel Agencies Devalue Exchange Rate

    International Travel Tickets To Rise As Travel Agencies Devalue Exchange Rate

    International travel tickets in Nigeria are on track to rise following a directive to travel agencies to adjust exchange rates from N420.86 to N460, effectively an 8.5% devaluation.

    Nigeria’s official exchange rate at the Investors and Exporters window is currently N410.11/$1.

     

    In an email communication sent to travel agencies, they were advised that exchange rates will be “going from N420.86 to N460 per dollar on GDS” starting today, Tuesday, July 13th 2021. They were also advised to “issue all pending tickets” using the new rates.

     

    The GDS is an acronym for Global Distribution System and is the platform used by the travel industry for issuing tickets. Booking platforms such as Amadeus, Sabre, Galileo, etc, all running on GDS already have their exchange rate adjusted to N460/$1.

     

    The adjustment in the exchange rate is a reflection of the market value of the naira in the exchange rate market. Unlike other industries, the travel industry has a history of relying on the official exchange rate (not IFEX) as a basis for issuing tickets after converting from dollars to naira.

     

    International airlines who are the original issuers of the tickets repatriate their funds by converting their naira proceeds into dollars based on the exchange rate.

     

    They also hedge against current risks by purchasing hedging instruments sold by the central bank.

     

    This adjustment reflects the market dynamics of Nigeria’s exchange rate quagmire, as supply of dollars continues to struggle to meet demand.

     

    The latest move by the airlines to adjust the official exchange rate for selling tickets could be a precursor to a wider adjustment at the I&E window which is what the central bank currently cites as Nigeria’s exchange rate.

     

    What this means

    Nigerians looking to travel internationally but yet to purchase tickets will pay higher due to the adjustment.

     

    This means a $1,000 ticket that previously cost N420k will now cost N460k, a 9.3% rise.

     

    It is also likely that other ancillary charges outside of ticket cost may also increase in tandem. For example, travel agency fees, commissions, applicable taxes might all increase.

     

    While travel is a small subset of the consumer price index, this price increase is likely to impact the inflation rate.

     

  • Exchange Rate Falls to N500/$1 at Black Market as Forex Speculators Intensify Their Activities

    Exchange Rate Falls to N500/$1 at Black Market as Forex Speculators Intensify Their Activities

     

    The exchange rate between the naira and the US dollar closed at N411.67/$1 at the official Investors and Exporters window.

     

    Naira depreciated on Monday against the US dollar to close at N411.67 to a dollar compared to N411/$1 recorded on Friday, 18th June 2021.

     

    Also, the exchange rate depreciated at the parallel market to close at N500/$1 on Monday, June 21, 2021. This represents a N2 drop when compared to the N498/$1 that was recorded on Friday, June 18, 2021.

     

    The drop in the value of the naira at the black market continued due to activities of speculators and lower liquidity at the forex market.

     

    Naira depreciated against the US dollar at the Investors and Exporters window on Monday to close at N411.67/$1, representing a 67 kobo drop when compared to the N411/$1 that was recorded the previous day.

     

    The opening indicative rate closed at N411.04 to a dollar on Monday, 21st June 2021, representing a 54 kobo gain when compared to the N411.58/$1 recorded on Friday, 18th June 2021.

     

    Also, an exchange rate of N420.88/$1 was the highest rate recorded during intra-day trading, before it settled at N411.67/$1. It also sold for as low as N400/$1 during intra-day trading.

     

    Forex turnover at the Investors and Exporters (I&E) window dropped by 33.5% on Monday, 21st June 2021.

  • BDC Operators Move To Crash Exchange Rate, Ban Street Hawking of Dollars

    BDC Operators Move To Crash Exchange Rate, Ban Street Hawking of Dollars

     

    Forex traders under the aegis of the Association of Bureau De Change Operators of Nigeria (ABCON) have said they will start what it called ‘Operation No Street Trading’ to stop the hawking of foreign exchange by BDC operators.

     

    This is part of the measures aimed at bringing down the exchange rate which has been on the rise recently especially after the adoption of the NAFEX rate as the new official rate by the Central Bank of Nigeria.

     

    This disclosure was made by the President of ABCON, Alhaji Aminu Gwadabe, who said that this was part of the resolutions made unanimously by BDC directors at the meeting of the operators on Tuesday, June 2, 2021, in Lagos.

     

    ABCON, in the resolution, told BDCs to improve on their return rendition to regulatory authorities, warning that defaulting members would be punished.

     

    The resolution from ABCON partly reads, “All operators are to collaborate in bringing down the forex rates in the market; street trading by BDC should be discouraged/banned and ABCON will commence operation ‘no street trading’.

     

    BDCs should improve return rendition to regulatory authorities; margin review to meet operational requirements; widening the scope of transactions; digitalisation of BDC operations.

     

    ABCON to punish errant members; ABCON compliance officer and staff to commence nationwide supervision of BDC operations.”

     

    Despite the sales of forex at N393 to a dollar to BDCs by the CBN, the exchange rate has been on the rise since the adoption of the NAFEX rate as the official rate by the CBN with the dollar selling for N499 on Thursday afternoon.

     

    ABCON had in a statement on Sunday, advised foreign exchange users and the general public to patronise only BDC operators licensed by the CBN in order to get dollars at the approved rate.

     

    Gwadabe said the parallel market activities had for years become major drivers of the exchange rates, adding that control over such transactions had become burdensome.

     

    He said forex speculators were capitalising on the state of the forex market and the naira to sell dollars above the CBN-approved margin.

     

    ABCON had some days ago, said that foreign exchange speculators are set to lose over N100 billion in the next one month as the CBN sustains massive funding for Bureau De Change (BDC) operators.

     

    The ABCON President called for the return of normalcy of the market as the ongoing speculative behaviour was hampering the market operations.

     

    The ABCON boss linked the continued fall of the naira at the parallel market and Investors’ and Exporters’ (I&E) Forex window to currency speculators who are hoarding dollars to profit from the currency crisis.

     

    He said the perpetrators are creating an artificial scarcity of the greenback within the market to cause more woes for the local currency.