Naira loses N90.43 at official market in one week

Nigeria’s currency, the naira, lost N90.43 of its value against the dollar within a week despite a rise in liquidity in the official foreign exchange (FX) market.

By the close of trading on Friday, the dollar was quoted at N1,631.21, resulting in depreciation of the naira by 5.54 percent compared to the previous week’s quote of N1,540.78 at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from the FMDQ Securities Exchange Limited.

On a daily basis, however, the naira appreciated by 1.72 percent or N28.05, as the dollar was quoted at N1,631.21 on Friday, improving from N1,659.26 quoted on Thursday at the NAFEM.

In the parallel market, also known as the black market, the naira strengthened against the dollar on a week-on-week basis. It gained 1.92 percent, or N32, to close at N1,665 per dollar on Friday, compared to N1,697 the previous Friday. Daily trading on the black market also showed the naira holding steady at N1,665.

During the week, dollar supply surged by 14.63 percent, equating to an increase of $133.66 million. The total dollar supplied by willing buyers and sellers rose to $1.05 million in four trading days between Monday and Friday, up from $913.40 million in the previous week’s trading period.

In a bid to address speculation and enhance transparency in the foreign exchange market, the Central Bank of Nigeria (CBN) introduced a new Electronic Foreign Exchange Matching System (EFEMS) on Thursday. The system, intended for authorized dealers in the Nigerian Foreign Exchange Market (NFEM), is scheduled to become fully operational by December 1, 2024, with a two-week test phase set to begin in November.

On Friday disclosed that it had sold a total of $543.5 million to authorised dealer banks in the Nigerian Foreign Exchange Market (NFEM) between September 6 and September 30, 2024.

The move, executed over 11 trading days, was part of the bank’s efforts to manage market volatility and address heightened demand for foreign exchange, particularly for commodity importation.

During this period, the CBN facilitated sales through two-way quotes, offering FX at rates ranging from N1530 to N1605 per US dollar, depending on the transaction day. The largest sale occurred on September 26, 2024, when the CBN sold $80 million at rates between N1570 and N1580 per US dollar.

The FX transactions carried out during the time were set on a value date of T+2, meaning settlement took place two days after the transaction.

The CBN’s intervention was aimed at curbing market volatility spurred by the significant demand for FX, especially for commodity imports. As Nigeria continues to navigate economic challenges, including pressures on its currency, the naira, the bank is focused on a strategy of ensuring adequate FX supply to stabilise the market.

In a statement, Omolara O. Duke, director of the CBN’s financial markets department, emphasised the importance of the spot sales as part of the broader FX management strategy.

“The CBN will continue to facilitate the supply of FX into the Nigerian foreign exchange market to ensure market stability and meet the country’s foreign exchange needs,” Duke said.