Naira hits seven-month high of N1,485.95 on CBN policies

The naira recorded a significant appreciation on Thursday, reaching its strongest level in seven months at N1,485.95 per dollar.

This sharp increase is attributed to the policies implemented by the Central Bank of Nigeria (CBN), which have influenced market dynamics and contributed to the currency’s strengthening.

Looking back seven months, the naira had previously been at a similar level, standing at N1,485.53 per dollar in the official market as of June 20, 2024.

This latest movement marks a return to that range, reflecting the impact of recent monetary and foreign exchange measures introduced by the CBN to stabilise the currency and improve market confidence.

After trading on Thursday, the naira appreciated by 1.67 percent, marking a gain of N24.8 as the dollar was quoted at N1,485.95 on Thursday compared to N1,510.72 seen on Wednesday at the Nigerian Foreign Exchange Market (NFEM), data from the FMDQ Securities Exchange Limited showed.

Authorised currency dealers quoted the dollar as high as N1,516 and as low as N1,470 per dollar at the NFEM.

The local currency witnessed a marginal loss of 0.6 percent or N10 as the dollar was quoted at N1,635 on Thursday as against N1,625 seen on Wednesday at the parallel market also known as black market.

The CBN on Tuesday issued a new Foreign Exchange (FX) Code aimed at enhancing market liquidity, transparency and guiding market participants in Nigeria’s foreign exchange sector.

“I think the whole idea is just to ensure that there is a lot more sanity in the foreign exchange market because those characters have really created a whole lot of problems over the years in the foreign exchange market,” Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise (CPPE), said .

“For me, I think that is what the CBN is trying to do and the more we’re able to sanitise the markets, I think the more stability it will achieve in the foreign exchange market,” he said.

The CBN has stated that while every effort has been made to ensure that the FX Code comprehensively addresses various aspects of market conduct and practice, it is not intended to be exhaustive.

This means that there may be instances where specific standards are not explicitly outlined, particularly in relation to certain issues or the introduction of new or emerging financial products. In such cases, market participants are expected to exercise sound judgment and adhere to best practices within the broader regulatory framework.

Issued as a guideline for the foreign exchange market, the FX Code is backed by the authority of the CBN Act of 2007 and the Banks and Other Financial Institutions Act (BOFIA) of 2020. These legislative instruments empower the CBN to establish and enforce directives regarding the standards financial institutions must follow in conducting foreign exchange business in Nigeria. The FX Code, therefore, serves as an official directive that all market participants are expected to observe in their operations.

As part of compliance requirements, market participants must conduct a self-assessment of their adherence to the FX Code and submit a report detailing their level of compliance to the CBN by January 31, 2025.

Following this, all institutions engaged in the foreign exchange market must also provide the CBN with a detailed implementation plan outlining how they intend to achieve full compliance with the FX Code. This plan must be formally approved and signed by the institution’s board of directors, and it must be accompanied by relevant extracts from the board meeting where the plan was reviewed and endorsed.