Steady dollar supply pushes naira to 1,262/$

April 4, 2024

The naira, on Wednesday continued its gain against the United States dollars, appreciating both at the official foreign exchange and parallel markets, to the delight of many Nigerians.

At the Nigerian Autonomous Foreign Exchange Market, the naira gained N16 or 1.26 per cent as the dollar was quoted at N1,262.85/$ on Wednesday, stronger than N1,278.58 closed on Tuesday, data from the FMDQ Securities Exchange indicated.

This means the local currency hasSteady dollar supply pushes naira to 1,262/$ continued its positive streak against the green with expectations of further appreciation.

The appreciation of the local currency was attributed to the several foreign exchange policies implemented by the Central Bank of Nigeria, to boost dollar supply and enhance transparency in the FX market.

On June 14, 2023, the CBN abolished market segmentation and collapsed all into the Investors & Exporters window (Now, Nigerian Autonomous Foreign Exchange); and re-introduced the Willing Buyer, Willing Seller framework, among other reforms.

In January 2024, the CBN directed the International Money Transfer Operators to quote an exchange rate for naira payout to beneficiaries based on the prevailing market price.

The banking and finance sector regulator, in February 2024, discontinued any form of cap on the spread on interbank Forex transactions and restrictions on the sales of interbank proceeds. In the same month, the CBN limited the payout of Personal Travel Allowance and Business Travel Allowance to electronic channels only.

In March 2024, the volatility of the naira was reduced following several reforms by the CBN to improve transparency and inflows into the FX market.

Currency traders, who spoke to The PUNCH attributed the naira appreciation to waning demand for the greenback and the decision of the apex bank to sell foreign exchange to operators.

A BDC operator at Wuse Zone 4, Ibrahim Yahu, stated, “The demand for dollars has really gone down and the naira is appreciating because of the new rate determined by the CBN for traders.

“The CBN initially started selling to us at N1,251 but they gave another rate last week Thursday at N1,190 and that is the reason for new fresh drop of the dollar. The CBN selling directly to us has really helped trading activities.”

Similarly, the intra-day high was quoted at N1,296.00 on Wednesday from N1,312/$1 recorded on Tuesday, while the intra-day low settled at 1,210.00, an improvement from N1,250/$1.

This also represents the slimmest exchange rate disparity observed between the intra-day high, intra-day low, and the closing rate, all falling under N130.

The average daily turnover reported was increase to $116m $111.8 million.

Also, at the parallel market, the naira, strengthened to N1,250 to a dollar, gaining 0.8 percent (N10) over N1,260 closed on Tuesday at the parallel market, popularly called the black market.

Compared to the level on February 20, 2024, naira has gained 46 percent of its value against the dollar from the lowest of N1,825/$ on the parallel market.

Source: Punch

Image: Market Forces Africa