Naira hits three-month high of 1,300/$ as FX supply surges 69.43%

The Naira has risen further to 1,300.43 on the official foreign exchange (FX) as dollar supply surged by 69.43 percent on Wednesday, a day after the Central Bank of Nigeria (CBN) raised further, the key interest rates.

After trading on Wednesday, the Naira gained 6.35 percent as the dollar was quoted at N1,300.43, stronger than N1,482.95 quoted on Tuesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data from the FMDQ Securities Exchange.

Dollar supply by the willing sellers and willing buyers rose by 69.43 percent from $245.58 million on Tuesday to $416.10 million on Wednesday, the highest since almost two months.

The summary of the FX trading revealed that the intraday high closed at N1,460 per dollar on Wednesday, stronger than N1,486/$ closed on Tuesday. The intraday low appreciated to N1,200 on Wednesday as against N1,300 closed on Tuesday.

At the parallel market, popularly called black market, Naira closed at between N1,310 and N1,350 in Lagos. In Abuja, some traders bought at N1,300 and sold at N1,320.

With the current rate at the official and black market, the exchange rate gap has closed at N9.57 on Wednesday.

“The CBN Governor sounded much more confident of NGN stability, even appreciation, going forward, now that the validated FX forward settlement backlog has been dealt with,” Razia Khan, managing director, Chief Economist, Africa and Middle East Global Research, Standard Chartered, said.

According to her, the CBN will rely on the FX appreciation channel to contain inflation, pledging that interest rates at these levels will not be ‘long drawn’. “While the next MPC meeting is scheduled for May 21, 2024 the CBN expects that inflation will soon peak, before decelerating again,” she said.

Nigeria’s Central Bank on Tuesday raised the key interest rate by 200 basis points to 24.75 percent from 22.75 percent in February 2024, to rein in inflation and stabilise FX.

In one month, the CBN has jerked its benchmark interest rate, also known as the Monetary Policy Rate (MPR) by 600 basis points to 24.75 percent in March 2024. Last month, the apex bank increased the interest rate by 400 basis points to 22.75 percent.