• Wednesday, February 28, 2024
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BusinessDay

Naira maintains gain despite low dollar supply

Foreign investors hit brakes in Nigeria over volatile naira

Nigerian Naira has appreciated against the United States currency in the last three trading days, despite a decline in dollar supply at the official foreign exchange (FX) market.

After trading on Monday, naira gained 1.49 percent as the dollar was quoted at N856.57, stronger than N869.39 quoted on Friday at the Nigeria Autonomous Foreign Exchange Market (NAFEM).

At the FX auction on Monday, willing buyers and willing sellers offered the dollar at a spot rate of N1,185, highest bid and N720 per dollar as the lower bid rate.

Dollar supply dropped by 55.93 percent to $59.66 million on Monday from $135.39 million recorded on Friday, according to the data from the FMDQ Exchange.

In a recent statement, Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, highlighted that the foreign exchange landscape in Nigeria is poised to be significantly influenced by developments surrounding the supply and demand fundamentals. Key factors on the supply side include progress in curbing crude oil theft,boosting oil output, and the potential for increased investment in the oil and gas sector, particularly leveraging the Petroleum Industry Act.

Yusuf emphasized that the resolution of the foreign exchange backlog by the Central Bank of Nigeria (CBN) would play a crucial role in enhancing investor confidence, leading to improved inflows in the medium to long term. Addressing this concern, the CBN recently announced the disbursement of approximately $61.64 million to foreign airlines through various banks, demonstrating its commitment to eliminating pending matured foreign exchange in Deposit Money Banks (DMBs).

Yemi Cardoso, the governor of the CBN, expressed optimism about the effectiveness of the bank’s monetary policies.

He outlined the objectives of achieving price stability, fostering sustainable economic growth, stabilizing the naira’s exchange rate, and reducing interest rates to facilitate borrowing and investments in the real sector.

Cardoso underscored the importance of clear, transparent, and harmonized rules governing market operations in both domestic and foreign currency markets. Additionally, he announced plans to develop new foreign exchange guidelines and legislation, with extensive consultations to be conducted with banks and FX market operators before implementing any new requirements.