Exchange rate falls at the NAFEX window on a depressed forex market – Nairametrics

Exchange rate falls at the NAFEX window on a depressed forex market – Nairametrics

An email that has gone viral reveals a Nigerian Bank is unable to pay dividends to its shareholders due to dollar shortages.

GDR is an acronym for Global Depository Receipts and is a vehicle for foreign investors to invest in shares from another country without trading in the stock exchange of the company’s home country.

The content of the email reads;

Kindly note that the update we received from our Registrars is that there has been some delay in payment of GDR Dividend due to the current thin Foreign Exchange (FX) liquidity. “

The email continues explaining the challenges they are facing sourcing forex.


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“They have been having been (sic) some difficulties in sourcing for US Dollars for the payment of dividend for GDR, and are currently on the FX queue at the Central Bank of Nigeria sourcing they Dollars.”

Nairametrics cannot verify the authenticity of the email and neither do we know who it was sent to. However, people familiar with the situation confirm this has been the experience for most dollar-denominated dividends payable to investors locally and abroad. Sourcing forex is at the official market price is getting tougher.

Since the COVID-19 pandemic, the central bank, has limited its supply of forex to the NAFEX market while private sellers of dollars have channeled sales to the black market. The CBN Governor, Godwin Emefiele in an interview in June, confirmed forex will be available pleading with investors to be patient.

Forex supply in the NAFEX market has traded below $1 billion in the last two months highlighting dollar shortages in the market. The CBN devalued the naira last week to N380/$1 for the second time since March in an effort to unify the naira.

Exchange rate disparity between the NAFEX and parallel market is as high as N84, further piling pressure on Nigeria’s fx management. Investors in Nigeria who expect dividend payment in forex continue to face the brunch of the fx dislocation as they see their return on investment erode.

The forex scarcity also deters further investments into the economy seeing that those who are already invested in the economy are finding it difficult to repatriate their funds.


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