Naira Approaches 1,000/$ Mark: Market Resurgence and Central Bank Measures
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The Nigerian currency, the naira, has shown remarkable strength against the United States dollar, with significant appreciation observed in both the official and parallel markets. At the close of trading activities on Monday, the naira reached N1,136/$ at the official market and N1,050/$ at the parallel market. Traders are even predicting a further decline in the dollar’s value to below N1,000 before the week concludes.
In the official foreign exchange market, data from the FMDQ Exchange revealed a notable surge in the naira’s value, rising by 6.1 per cent or N69 from N1,205/$ recorded on Friday to N1,136/$ on Monday. The total daily turnover slightly decreased to $251.60 million on Monday, down from $281.34 million recorded on Friday.
Moreover, the intra-day high also saw improvement, closing at N1,227 per dollar, while the intra-day low appreciated by N100/$1, with the dollar quoted at N1,000 on Monday compared to N1,100 quoted on Friday.
This upward trend in the naira’s value follows a series of foreign exchange directives by the Central Bank of Nigeria (CBN) aimed at stabilizing the currency. Notably, the CBN has resolved all valid foreign exchange backlogs, addressing inherited claims amounting to $7 billion, as pledged by the CBN governor, Olayemi Cardoso.
Data from the FMDQ also indicates a significant increase in total inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM), reaching $3.75 billion, the highest level since March 2019.
In line with efforts to control inflation and stabilize the naira, the CBN recently raised its benchmark interest rate by 200 basis points to 24.75 per cent. Analysts at Afrinvest anticipate further strengthening of the naira as the CBN intensifies efforts to bolster liquidity in the market.
However, currency traders at the popular Wuse Zone 4 market expressed concerns about the declining profitability of their business due to the decreasing naira rates. Some traders reported buying the dollar between N950 and N980 and selling between N1,010 and N1,020. The low demand has led to negotiations below N1,000 for buying and selling.
Despite challenges faced by currency traders, the naira’s resilience has garnered attention globally, with Goldman Sachs Group recognizing it as the top-performing currency globally in April. Goldman Sachs economists now anticipate the naira to surpass their earlier forecast of strengthening to N1,200/$ in 2024, attributing this optimism to aggressive measures by the CBN, including substantial interest rate increases.
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