The naira is witnessing a revival against the US dollar, with an increase to N1,136/$ in the official exchange and N1,050/$ in the informal exchange at the end of Monday’s trading session.
Market participants forecast that the dollar might decline to below N1,000 by week’s end.
At the regulated foreign exchange market, figures from the FMDQ Exchange, which governs the Nigerian Autonomous Foreign Exchange Market, showed that the naira jumped by 6.1 percent or N69, moving from N1,205/$ on Friday to N1,136/$ on Monday.
The overall daily trading volume saw a minor decrease to $251.60 million on Monday, down from $281.34 million on Friday.
The highest rate during the day also saw a notable improvement, ending at N1,227 per dollar compared to N1,265 per dollar on Friday. The lowest rate during the day rose by N100/$1, with the dollar reaching N1,000 on Monday, stronger than the N1,100 on Friday.
This enhanced rate comes after a series of foreign exchange policies by the Central Bank of Nigeria (CBN) aimed at stabilizing the naira. Last month, the CBN announced it had addressed all outstanding valid foreign exchange demands, fulfilling a commitment made by CBN Governor Olayemi Cardoso to clear backlogs totaling $7 billion.
FMDQ data also showed that total inflows into the NAFEM rose by 41.7 percent to $3.75 billion compared to $2.64 billion in February – the highest since March 2019, which saw $6.07 billion.
The CBN recently adjusted the exchange rate for Bureau De Change operators to N1,101 per dollar from N1,251/$, planning to distribute $15.88 million to 1,588 qualified BDC operators.
In an effort to curb inflation and maintain the naira’s stability, the CBN last month increased its key interest rate, the Monetary Policy Rate, by 200 basis points to 24.75 percent from 22.75 percent in February 2024.
Analysts at Afrinvest anticipate that the naira will keep gaining strength as the CBN continues to enhance market liquidity.
In the unregulated market, currency dealers at the Wuse Zone 4 market expressed frustration over the naira’s valuation, noting that the business was becoming unprofitable.
Malam Ibrahim, in discussion with our reporter, stated he purchased dollars at rates between N950 and N980 and sold them for between N1,010 and N1,020.
He mentioned that the weak demand has led currency dealers to propose buying rates below N1,000 and selling rates between N1,010 and N1,020.
Another dealer confirmed similar rates, remarking, “The buying rate is almost falling below N1,000/dollar, and the selling rate is similar. The dollar is plummeting rapidly. We began purchasing at N1,030 today, but then the rates began to fall. Business is sluggish, and the CBN’s rate has impacted us. The biggest issue now is that we’re buying without sufficient demand to sell, leading to challenges. This is why the rate dropped today. I bought at N1,000 today but can’t sell at that rate anymore. We’ve even dipped below the CBN’s rate.”
When reached out to other dealers for an average rate, they reported buying at N900 and selling at N940 per dollar.
Last week, Goldman Sachs Group, an investment firm, noted that the Naira had become the best-performing currency globally in April and expected it to continue its upward trajectory, supported by the CBN’s effective policy management.
Goldman Sachs economists, who had predicted in February that the Naira would rise to N1,200/$ in 2024, now believe it could exceed this level due to the CBN’s assertive actions, including a total of 600 basis points hike in interest rates during the policy meetings in February and March.
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