Naira recorded marginal gains against the US currency following a significant increase in dollar liquidity at the official foreign exchange (FX) market on Monday.
After trading on Monday, naira appreciated by 0.17 percent as one dollar was quoted at N888.35 compared to N889.86 quoted on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), data from the FMDQ showed.
The FX market recorded increased dollar supply as the daily foreign exchange market turnover rose by 230.82 percent to $137.82 million on Monday from $41.66 million recorded on Friday.
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The dollar flows came from the willing buyers and willing sellers as they quoted the greenback as high as N1,249 and lower rate of N720 on the spot trading.
According to analysts, the increase in dollar supply in Nigeria’s forex market stems from a combination of the CBN interventions, policy adjustments, market dynamics, and expectations of future inflows. However, ongoing efforts and sustained improvements in the underlying economic conditions are crucial for long-term stability and reducing reliance on temporary measures.
Yemi Cardoso, governor of the CBN, noted in November 2023 that the country had already witnessed improvements in FX market liquidity in recent weeks, as the market responded positively to tranche payments which have been made to 31 banks to clear the backlog of FX forward obligations.
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“We have been subjecting these payments to detailed verification to ensure only valid transactions are honored. In a properly functioning market, it is reasonable to expect significant FX liquidity, with daily trade potentially exceeding $1.0 billion.
We envision that, with discipline and focused commitment, foreign exchange reserves can be rebuilt to comparable levels with similar economies,” he said.
He said new foreign exchange guidelines and legislation will be developed, and extensive consultations will be conducted with banks and FX market operators before implementing any new
requirements.
