At the Investors’ and Exporters’ (I&E) forex window, the naira gained 6.58 percent as the dollar was quoted at N742.93 on Tuesday as against N795.28 quoted on Monday, data from the FMDQ indicated.
The naira appreciation was helped by increased dollar liquidity from willing sellers and willing buyers who participated at the I&E FX market auction on Tuesday.
Consequently, the daily foreign exchange market turnover increased significantly by 352.35 percent to $156.29 million on Tuesday from $34.55 million recorded on Monday.
However, the foreign exchange market opened on Wednesday with naira depreciating to N830 at the parallel market, popularly known as black market.
The market closed at the same rate on Tuesday, from an average rate of N825 per dollar during morning trading on the same day.
Traders attributed the naira depreciation to strong demand for dollars by individuals and importers.
On June 14, 2023, the CBN abolished segments of the official FX market to the I&E Window, where the “willing buyer and willing seller” was re-introduced. Based on this adjustment, the official rate rose from N463.38/$ to N830, the current rate.
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Despite the CBN’s floating of the naira, a large supply deficit remains in the fx market, said analysts at FBNQuest.
“Therefore, we expect substantial volatility in the naira exchange rate, at least in the near term. Also, we do not see an increase in liquidity from foreign portfolio investors as they will likely remain on the sidelines until they can repatriate a substantial proportion of their trapped fx funds, estimated at roughly USD3bn. In this context, we see an end-year rate of N825/USD,” the analysts said.
According to the analysts, sweeping reforms revamped the foreign exchange market, uniting fragmented market segments, eliminating trading restrictions, and bridging the gaping chasm between the official and parallel market rates. These actions aim to attract investments and stimulate economic growth.
“We are optimistic that the policy reforms investors have embraced will steer the nation towards a positive growth trajectory and lay the foundation for sustainable growth,” the analysts said.
