The naira has continued to appreciate as the US dollar is currently selling at N1,280 on the parallel market, following the recent foreign exchange (FX) policy measures of the Central Bank of Nigeria (CBN).
With the current rate, the Naira has gained 2.34 percent of its value against the dollar in less than one day, from N1,310 the closing rate for Wednesday.
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When compared to the level on February 20, 2024, the naira has gained 42.58 percent of its value against the dollar from the lowest of N1,825/$ on the parallel market, popularly called the black market.
“Customers are bringing out dollars for us to buy. So, there are enough dollars in the market now but demand is low,” one street trader told BusinessDay on Thursday.
On the official market, the naira rose further to N1,300.43 as dollar supply surged by 69.43 percent on Wednesday, a day after the Central Bank raised the key interest rates.
The naira has been appreciating against the dollar recently following some foreign exchange reforms by the Central Bank of Nigeria (MPC).
Key reforms include the unification of exchange rate windows, liberalization of the FX market, clearance of FX backlog obligations for banks and airlines, implementation of a Price Verification System (PVS), imposition of limits on banks’ Net Open Position, removal of the daily cap of N2 billion on remunerable Standing Deposit Facility (SDF), and overhaul of the Bureau De Change (BDC) segment.
Additional measures focus on fostering a willing buyer-willing seller market, eliminating margin limits for International Money Transfer Operator (IMTO) remittances, introduction of a two-way quote system, and comprehensive reforms within the BDC segment to bolster stability, transparency, supply, and price discovery in the Nigeria Autonomous Foreign Exchange Market.
The CBN sold dollars at N1,251 to the Bureau De Change (BDC) Operators. A circular from the CBN indicated that the apex bank directed the BDCs to sell to eligible customers at a rate not exceeding 1.5 percent above the purchase price.
“Since the last MPC meeting, the naira has firmed up, appreciating by 9.5 percent to N1475/$ from N1615/$ on the day of the meeting (February 27),” a report by Financial Derivatives Company Limited (FDC) stated.
According to the report strengthening of the naira was bookended by the scarcity of the naira which has moderated the demand for dollars. Other factors include increased supply of forex exchange and sanitization of the FX market.
