The Naira, Nigeria’s currency strengthened against the dollar all through the five trading days as the foreign exchange (FX) market closed on Friday.
The local currency gained 9.88 percent to close at 1,431.49 per dollar on Friday from the opening rate of 1,572.86 per dollar on Monday, at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
On a daily trading basis, the naira appreciated by 1.52 percent as the dollar was quoted at N1,431.49 on Friday, stronger than 1,453.28 quoted on Thursday at NAFEM according to data from the FMDQ Securities Exchange.
The summary of the daily FX market trading showed that the intraday high closed at N1,468 per dollar on Friday, stronger than N1,598/$1 closed at on Thursday. The intraday low closed flat at N1,301 per dollar on Friday as against N1,300/$1 on Thursday.
At the parallel market, commonly referred to as black market, the naira strengthened by 8.20 percent for the five trading days closing at an average rate of N1,469.50 per dollar on Friday compared to N1,590/$1 recorded at the beginning of the week, according to data compiled by BusinessDay from different street traders and FX trading platforms.
Bismark Rewane, managing director/Chief Executive Officer of Financial Derivatives Company Limited is of the view that the naira appreciation is sustainable.
“The truth is that it is sustainable as long as you do a number of things,” he said, on Channels Television on Thursday.
He said “one is that the interest rate has been increased therefore the propensity to save has increased and the propensity to consume has actually reduced. People are consuming less and saving more if they are saving.”
The Central Bank has implemented a series of policy reforms aimed at enhancing liquidity in the FX markets across short, medium, and long-term horizons.
Key reforms encompass the unification of exchange rate windows, liberalization of the FX market, clearance of FX backlog obligations for banks and airlines, implementation of a Price Verification System (PVS), imposition of limits on banks’ Net Open Position, removal of the daily cap of N2 billion on remunerable Standing Deposit Facility (SDF), and overhaul of the Bureau De Change (BDC) segment.
Additional measures focus on fostering a willing buyer-willing seller market, eliminating margin limits for International Money Transfer Operator (IMTO) remittances, introduction of a two-way quote system, and comprehensive reforms within the BDC segment to bolster stability, transparency, supply, and price discovery in the Nigeria Autonomous Foreign Exchange Market.
Furthermore, in a bid to combat inflation and stabilize the naira, the Monetary Policy Committee (MPC) convened on February 26 and 27, 2024. During the meeting, the MPR surged by 400 basis points to 22.75 percent from 18.75 percent, the asymmetric corridor surrounding the MPR was adjusted to +100/-700 basis points from +100/-300, the Cash Reserve Ratio surged from 32.5% to 45.0%, while the Liquidity Ratio remained steady at 30.0 percent.
Muhammad Sani Abdullahi, Deputy Governor of the CBN overseeing economic policy, highlighted that post-February 27 MPC, FX rates experienced a marginal appreciation of 0.33 percent on March 8, 2024, closing at N/US$1,625.23 compared to N/US$1,630.66 on February 27, 2024.
The CBN declared on Wednesday that it has successfully resolved all valid foreign exchange backlogs, as pledged by Governor Olayemi Cardoso, addressing inherited claims amounting to US$7 billion.
Hakama Sidi Ali, CBN’s acting director of corporate communications, conveyed this information in a statement sent via mail. She stated that the CBN finalized the payment of $1.5 billion to settle obligations to bank customers, thereby clearing the remaining balance of the FX backlog.
According to analysts at Comercio Partners, this accomplishment fulfills Cardoso’s commitment to addressing the backlog, with meticulous efforts dedicated to settling outstanding transactions.
The CBN reported a significant boost in external reserves, reaching $34.11 billion, the highest level in eight months, driven by remittances from Nigerians abroad and increased purchases of local assets by foreign investors.
Independent auditors from Deloitte Consulting verified the legitimacy of each transaction, ensuring that only valid claims were honored. The clearance of the backlog aligns with the CBN’s strategy to stabilize the exchange rate, mitigate imported inflation, and enhance confidence in the banking system and economy.
“Cardoso underscored the significance of this action in restoring credibility and confidence in Nigeria’s economy, signaling a positive stride towards a more resilient and stable financial landscape, thereby fostering confidence among investors and businesses,” the analysts said.
