The pressure on the foreign exchange (FX) market has eased as Naira on Monday appreciated to N1,340 per dollar on the parallel market stronger than N1,408.04 on the official market, resulting in an exchange rate gap of N68.04.
This represents an 8.21 percent gain against the dollar, compared to N1,450/$1 closed on Monday at the unofficial market. When compared to the level on February 20, 2024, naira has gained 36.19 percent of its value against the dollar from the lowest of N1,825/$ on the parallel market, popularly called black market.
At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira appreciated by 1.64 percent as the dollar was quoted at N1,408.04 on Monday, stronger than N1,431.49 quoted on Friday.
In the last one month, naira has strengthened by 18.28 percent to N1,408.04 on Monday from the lowest of N1,665.50 closed on February 23, 2024, according to the data compiled from the FMDQ Securities Exchange.
According to a report by Financial Derivatives Company Limited (FDC) the naira has been on a free fall since 2019 due to low forex liquidity, loss of confidence as a store of value, increased naira speculation and fear, restrictions and exchange rate control, and negative real interest rates.
The naira has been appreciating against the dollar recently following some foreign exchange reforms by the Central Bank of Nigeria (CBN).
Key reforms encompass 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.
