Naira gains for second straight day at official FX market

The naira on Thursday appreciated against the dollar for the second straight day since the increase in the Monetary Policy Rate (MPR) by the Central Bank of Nigeria.

The currency gained 0.90 percent on the day as the dollar was quoted at N1,595.11, stronger than N1,609.51 quoted on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data published by FMDQ Securities Exchange.

Dollar supply increased by 53.18 percent to $182.50 million on Thursday from $119.14 million recorded on Wednesday.

At the parallel market, popularly called black market, the naira fell for the first time since the MPR hike.

The local currency lost 8.23 percent of its value as the dollar was sold for N1,580 on Thursday, according to data from multiple traders, down from N1,450 on Wednesday.

The CBN raised its Monetary Policy Rate, also known as its benchmark interest rate by 400 basis points to 22.75 percent on Tuesday from 18.75 percent in July 2023 in a bid to stabilise the naira and curb accelerating inflation.

The Monetary Policy Committee (MPC) meeting, which held on Monday and Tuesday, raised the MPR by 400 basis points to 22.75 from 18.75 per cent., adjusted the asymmetric corridor around the MPR to +100/-700 from +100/-300 basis points, raised the Cash Reserve Ratio from 32.5 per cent to 45.0 per cent, and retain the Liquidity Ratio at 30 per cent.

Olayemi Cardoso, governor of the CBN, on Thursday disclosed plans to clear the remaining foreign exchange backlogs within a week and a half. This revelation came during a Foreign Portfolio Investor call hosted by the Nigerian Exchange Group (NGX) in collaboration with the CBN team.

Cardoso highlighted that recent reforms implemented by the CBN are specifically aimed at addressing distortions in the foreign exchange market. Responding to inquiries regarding the current size of the FX backlogs and the strategies in place to resolve them, he revealed that the CBN has already cleared its FX backlog in all but five banks. He assured stakeholders that these remaining backlogs would be resolved swiftly within the specified timeframe.

The announcement comes amidst efforts by the Nigerian government and the CBN to stabilize the country’s foreign exchange market and boost investor confidence. Clearing the FX backlogs is expected to streamline currency exchange processes, promote transparency, and enhance liquidity in the market.

This proactive stance by the CBN underscores its commitment to implementing effective measures to address challenges in the foreign exchange system and ensure a conducive environment for economic growth and stability.