Naira recovers as dollar supply rises by 63%

The naira on Wednesday recovered from a week-long losses, following an increase in dollar supply by 62.81 percent at the official foreign exchange (FX) market.

After trading on Wednesday, the naira gained 0.76 percent as the dollar was quoted at N1,608.73 compared to N1,621.12 seen on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data from the FMDQ Securities Exchange Limited.

The dollar supplied by willing buyers and willing sellers increased by 62.81 percent to $270.81 million on Wednesday from $166.34 million recorded on Tuesday.

During the intraday trading, FX market participants quoted the dollar at a high rate of N1,645 on Wednesday as against N1,635. The intraday low closed at N1,399.04 on the same day from N1,546 per dollar closed on Tuesday.

At the parallel market, also known as the black market, the naira traded at N1,610 per dollar on Wednesday compared to N1,600/$ on Tuesday.

The pressure on the Naira has intensified in the last one week following strong demand for dollars by individuals traveling for the summer holidays and for school fees payments, traders said.

Nigeria’s currency on Tuesday slumped to a four-month low of N1,621.12 per dollar, following strong demand on the official FX market. The naira traded at a lowest of N1,627.40 per dollar on March 8, 2024.

Bureau De Change (BDC) operators in the country have called on the Central Bank of Nigeria (CBN) to increase its intervention to stem the high volatility and enhance confidence in the foreign exchange (FX) market.

They made the call through Aminu Gwadabe, president of Association of Bureau De Change Operators of Nigeria (ABCON), who released a statement in response to BusinessDay’s question.

Gwadabe said despite significant interventions by the CBN, including the injection of millions of dollars into the interbank market, the naira has fallen to a new low of N1621 per US dollar at the NAFEM window.

He commended the CBN for resuming foreign exchange sales to BDC operators, recognising this policy as a key tool in mitigating the retail market volatility. However, he emphasised that more decisive actions are needed, urging the CBN to collaborate more closely with BDCs, which he described as crucial for maintaining adequate liquidity and reducing volatility in the retail forex market.

“The BDCs remain the most effective tool of foreign exchange policies of the apex bank,” Gwadabe stated. “We provide an efficient demand monitoring mechanism and price stability in the retail end of the market.”

To address the current crisis, Gwadabe called for increased volumes and frequencies of CBN interventions through BDCs. He also urged the CBN to reconsider the stringent requirements for BDCs’ reapplication for licenses and to extend the deadline for these applications.

Gwadabe appealed to the fiscal authorities to uphold integrity in their dealings to ensure their policies are relevant and accepted by the Nigerian public. He stressed that dialogue, rather than conflict, is essential to resolving the nation’s economic challenges, including hunger, inflation, insecurity, and unemployment.

In a message to investors, Gwadabe emphasised the importance of strong fiscal and monetary policy structures, stating, “Capital only follows infrastructures.”