The Nigerian naira closed the week on a positive note, recording gains in the official foreign exchange (FX) market. As of Friday, the local currency appreciated by 2.29 percent, translating to a gain of N35.32 against the dollar this week.
The naira was quoted at N1,540.78 per dollar, compared to N1,576.10 on Thursday, at the Nigerian Autonomous Foreign Exchange Market (NAFEM) according to data from the FMDQ Securities Exchange Limited.
Weekly Performance Overview
Over the course of the week, the naira demonstrated moderate improvement in the NAFEM. On a weekly basis, the currency strengthened by 1 percent, closing at N1,540.78 on Friday, up from N1,562.66 on Monday, the first trading day of the week.
Dollar Supply Fluctuations
In terms of dollar supply, there was a sharp decline in the availability of foreign currency on Friday. The amount of dollars supplied by willing buyers and sellers decreased by 36.44 percent, dropping from $334.05 million on Thursday to $212.31 million on Friday at NAFEM. However, on a weekly basis, the supply of dollars rose substantially. Starting at $100.21 million on Monday, it climbed by an impressive 111.9 percent to close at $212.31 million on Friday.
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Parallel Market Decline
Meanwhile, in the parallel market, also known as the black market, the naira did not fare as well. The currency depreciated by N5 per dollar, closing the week at N1,700 on Friday, down from N1,695 on Thursday. Over the course of the week, the naira fell by 2.1 percent, losing N35 compared to the N1,665 traded on Monday.
Central Bank Intervention
The Central Bank of Nigeria (CBN) took action during the week to stabilise the foreign exchange market. Towards the close of trading on Thursday, the CBN sold $60 million to commercial banks. In addition, the CBN provided dollars to Bureau De Change (BDC) operators at a rate of N1,590 per dollar in a bid to improve liquidity in the FX market.
The CBN clarified that each eligible BDC could purchase up to $20,000 to meet the growing demand for invisible transactions, which include personal travel allowances, medical bills, and educational expenses. In a statement signed by W. J. Kanya, acting director of the trade and exchange department, the CBN explained, “This move is to ensure adequate liquidity and meet the growing demand for invisible transactions in the market.”
BDC operators have responded positively to the CBN’s intervention. One operator commented, “This will help stabilise the market and give us the ability to meet customer demands more efficiently.”
Guidelines for BDCs
The CBN outlined specific guidelines for BDC operators participating in the intervention. They are required to sell dollars to end-users at no more than a one percent margin above the CBN’s purchase rate. BDC operators interested in accessing the dollars must deposit the required naira equivalent in the CBN’s designated accounts and submit the necessary documentation at specific branches located in Abuja, Awka, Kano, and Lagos.
The CBN emphasised the importance of strict adherence to the guidelines to ensure a smooth process. “Our goal is to maintain stability in the foreign exchange market and ensure that eligible end-users are able to meet their transaction needs,” Kanya stated.
The intervention from the Central Bank, along with the naira’s modest gains at NAFEM, has created cautious optimism among market participants. However, the challenges in the parallel market suggest that further actions may be needed to ensure overall stability in Nigeria’s foreign exchange markets.
