Further signs of the improving prospect for Nigeria’s national currency the Naira emerged from Tuesday’s daily transaction data which showed that the Naira had appreciated to N1,583/$ on the official market, NAFEM as at 12:57pm.
Data tracking transactions on the main foreign exchange window where volumes are rising and traders are now increasingly quoting rates below N1,600 to the dollar, attest to the Naira strengthening, traders informed BusinessDay.
Data available to BusinessDay show that on Monday March 18, more than $306m was traded in 271 deals and with 73 or about 43 per cent of the deals coming in the rate range of between N1,400/$-N1,450/$.
Only 37 deals or about 9 per cent came in the N1,600/$-N1,650/$ rate range.
The data for the day also showed that 132 deals came at a range below N1,600/$ for a total of $102.98m.
“The Naira is turning the corner and we now expect a gradual climb from here,” one senior dealer told our reporter. He added, “A month ago, most deals were quoted at over N1,600/$ but as you can see today, the percentage of quotes at or above N1,600/$ has fallen significantly.”
Nigeria is competing for investors’ attention with countries like Egypt where there has been significant interest lately because of the huge inflow of dollars flowing from the Gulf and even the World Bank which announced a support of $6bn for the north African nation on Tuesday.
But traders said attention is shifting back to Nigeria on the back of a rise in foreign reserves to $34.37bn and a rare convergence in the official and black market rates of the local currency is giving people in Nigeria hope of a stronger Naira after a tumultuous three months that brought pain and misery.
The official and parallel-market exchange rates for the naira have converged in recent days as capital inflows surged, giving credence to a forecast by Goldman Sachs Group that the Nigerian currency will strengthen over the coming months.
The naira was traded at 1,609 per dollar on the official market on Thursday last week, according to Lagos-based FMDQ, which tracks the data, almost in line with the parallel-market rate of 1,610.
The official rate has been within 3% on either side of the parallel-market rate since last week, compared with a spread of more than 30% in January, before the central bank introduced measures to improve dollar liquidity.
The current convergence in the two rates is the longest streak since the nation initiated foreign exchange market reforms in June.
And data from the Central Bank of Nigeria showed that the foreign reserves increased by 3.62% to $34.37bn as of March 12, up from $33.17bn recorded at the beginning of February 2024.
Africa’s most populous nation first implemented measures in June to attract inflows, effectively devaluing the naira and pushing the official and unofficial market rates closer together for a brief period. It allowed the local currency to weaken again in January.
A jumbo interest rate hike last month helped stabilize the naira.
Data on Friday showed that inflation accelerated to 31.70% in February, according to Nigeria’s Bureau of Statistics and this raised suggestions the central bank may be prompted to keep raising borrowing costs.
The measures are starting to pay off, with overseas remittances rising more than fourfold to $1.3 billion in February from a month earlier, according to Hakama Sidi Ali, a spokeswoman for the central bank.
Foreign-investor portfolio asset purchases exceeded $1 billion in February, bringing total inflows this year to at least $2.3 billion, compared with $3.9 billion for the whole of 2023, Ali said last week.
The nation’s foreign exchange reserves at $34.37 billion are the highest since June 21, according to central bank data.
If the central bank continues to raise interest rates, the naira could strengthen from here, according to Goldman Sachs.
“When it comes to the metrics of value, carry and real rates,” Nigeria’s naira is now one of the “more attractive frontier currencies, with recent rate increases,” Goldman Sachs analysts including Kamakshya Trivedi and Caesar Maasry wrote in a note. They see the naira appreciating to 1,200 per dollar in the next year.
