The Nigerian naira continues to demonstrate its remarkable recovery against the United States dollar, with a surge to N1,136/$ at the official market and N1,050/$ at the parallel market upon conclusion of trading on Monday.
Market observers have predicted that the dollar’s decline could push it below the N1,000 mark before the week concludes.
According to data from the FMDQ Exchange, the platform overseeing the Nigerian Autonomous Foreign Exchange Market, the naira experienced a substantial 6.1% appreciation, equivalent to N69, from Friday’s rate of N1,205/$ to Monday’s rate of N1,136/$ in the official foreign exchange market.
Total daily turnover registered a slight decrease, reaching $251.60 million on Monday compared to the $281.34 million recorded on Friday.
Significant improvements were also observed in the intraday high and low rates, with the former closing at N1,227 per dollar compared to N1,265 per dollar on Friday, and the latter showing appreciation of N100/$1 as the dollar traded at N1,000 on Monday, stronger than the N1,100 quoted on Friday.
These positive developments are attributed to a series of foreign exchange directives issued by the Central Bank of Nigeria (CBN) aimed at stabilizing the naira. In the previous month, the CBN assured the resolution of valid foreign exchange backlogs amounting to $7 billion, as pledged by CBN Governor Olayemi Cardoso.
Additional data from the FMDQ reveals that total inflows into the Nigerian Autonomous Foreign Exchange Market increased by 41.7%, reaching $3.75 billion in comparison to February’s $2.64 billion, representing the highest level since March 2019 ($6.07 billion).
In its efforts to control inflation and stabilize the naira, the CBN recently raised its benchmark interest rate, known as the Monetary Policy Rate, by 200 basis points to 24.75% from 22.75% in February 2024.
Analysts at Afrinvest anticipate further strengthening of the naira as the CBN intensifies liquidity-boosting measures in the market.
Meanwhile, currency traders at the popular Wuse Zone 4 market expressed dissatisfaction with the current naira rates, stating that the business is no longer profitable. Traders reported buying the dollar within the range of N950 to N980 and selling it between N1,010 and N1,020.
Some traders noted that due to low demand, currency trading is now negotiated below N1,000 for buying, and even for selling, the rates are approaching the same level. The rapid decline of the dollar is causing concerns, and the lack of demand for selling is impacting the traders. The rates dropped today, with some traders buying at N1,000 but unable to sell at that price, even going below the CBN’s specified rate.
When contacted for an average rate, other traders disclosed that they were buying at N900 and selling at N940 per dollar.
Goldman Sachs Group, an investment company, recently highlighted the naira as the best-performing currency globally in April. They anticipate further gains for the local currency due to effective policy management by the CBN. Earlier predictions by Goldman Sachs economists in February estimated the naira to strengthen to N1,200/$ in 2024, but they now believe it could surpass this level due to the central bank’s aggressive measures, including a total of 600 basis points in interest rate increases during policy meetings held in February and March.
