The Nigerian currency, Naira got off to a great start this month by increasing by N30.81 from the last Thursday’s rate of N1,278.58 against the US dollar.
Data from FMDQ Securities have disclosed that the indicative exchange rate for Nigerian Autonomous Foreign Exchange Market (NAFEX) has gone below N1300 first time since January 26, earlier this year.
On March 13th, 2024, Naira fell to a low of N1615 to a dollar.
Since then till now, the naira has appreciated significantly – it has gained over 21% against the dollar and other major international currencies.
CBN policies are responsible for increased forex market liquidity.
Important changes include: Exchange Rate Frameworks Harmonization; Liberalization of FX Market; Resolution of FX Backlog Commitments for Banks and Airlines; Introduction of Price Verification System; Net Open Position Limitation on Banks; Removing Daily Limit on Remunerative Standing Deposit Facility (RSDF); Re-engineering BDC Sector.
Forex turnover, a key indicator of finance, represents the aggregate value of all foreign exchange transactions within a given period, and throws light on the liquidity and dynamism of forex market.
The high turnover rates indicate an active market with buyers and sellers dealing in currencies which can be a sign of investor confidence and economic strength.
In the past two weeks, Central Bank of Nigeria had supported the dollar supply in its foreign exchange market by $2.5 billion among other financial institutions.
Similarly, FX trading at Nigerian Autonomous Foreign Exchange Market reduced 106% to $111.18 million on Tuesday from $857 million last week’s close.
FX trading summary showed that intraday peak settled at N1,312, down from 1392 per dollar last Thursday while intraday low was maintained at N1,250 level throughout this period.
On Tuesday after Easter break naira appreciated to N1220 in parallel market where Bureau De Change operators purchased dollars at N1220 and sold them to customers either cash or through transfer mode at N1265 resulting into profit of N30.
There was an upswing of 1.99% from the N1,280 rate that held the previous week to this week’s rate.
This follows the CBN initiative that cleared all outstanding fx backlog including the last tranche of $1.5 billion thus strengthening the country’s currency in both parallel and official markets.
As a result, March 2024 saw a 21.8% rise month on month which it is expected will be sustained well into April due to The Central Bank policy strategies.
Currency traders who spoke with THE PUNCH attributed naira’s climb to reduced demand for US dollars and CBN decision to fund dealers with foreign exchange issues being exchanged.
One Bureau De Change operator from Wuse Zone 4 stated: “The dollar demand has gone down significantly, while naira value is now rising as a result of new rates set by CBN for traders. They initially sold to us at N1,251 but introduced a new rate last Thursday at N1,190 prompting another fall in the value of the dollar. Direct sales from CBN have greatly enhanced trading.”
Another dealer, Malam Yunusa, confidently said that the naira will continue to firm against the dollar as dealers also aim at naira’s growth.
Aminu Gwadabe, President Association of Bureau De Change Operators of Nigeria recently highlighted that the strengthening Naira was not only due to a tightening monetary policy which hiked interest rates on government securities but also clearance of a $7 billion forex backlog on forward commitments. The narrative continues…
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