Naira jumps to 4-month high of 1,142.38/$ at official market as dollar supply doubles

The naira hit a four-month high of 1,142.38 per US dollar at the official foreign exchange (FX) market on Friday as dollar supply increased after the holidays.

Banks sold a dollar sold for N1,142.38 on the day, a 7.7 percent appreciation compared to N1,230.61/$1 quoted on the previous trading day at the Nigerian Autonomous Foreign Exchange Market (NAFEM).

Dollar supply rose by 124.08 percent to $281.34 million on Friday from $125.55 million recorded on Monday at NAFEM.

The intraday high closed at N1,265 per dollar on Friday, weaker than N1,261/$1 quoted on Monday. The intraday low appreciated by N100/$1 as the dollar was quoted on the spot at N1,100 on Friday, stronger than N1,200 quoted on Monday.

At the parallel market, commonly referred to as the black market, the Naira closed at N1,125 per dollar on Friday after the three days holiday declared by the Federal Government.

Nigeria’s naira is on a remarkable trajectory, emerging as the top-performing currency globally this month.

The naira’s surge, amounting to 12 percent against the dollar in April and following a 14 percent rise in March, is attributed to capital inflows and interest rate hikes.

These factors are aiding the currency’s recovery from significant losses incurred due to two devaluations since June, prompted by the government’s relaxation of currency controls.

Previously, the naira suffered a drastic decline, losing 71 percent of its value at one point, but it has now rebounded to 1,142 per dollar at its latest official close, compared to a record low of 1,627 on March 8.

Goldman Sachs economists, who initially forecasted in February that the naira would strengthen to 1,200 per dollar by the end of 2024, now envision the possibility of it surpassing that level.

This optimism stems from a series of measures implemented by the Central Bank of Nigeria, including a total of 600 basis points of interest rate hikes during policy meetings in February and March, along with other initiatives to alleviate the local dollar scarcity, which exacerbated volatility and forced businesses to turn to the parallel market.

Additionally, local dollar liquidity has improved following the clearance of a backlog of overdue dollar purchase agreements estimated at $7 billion.