Naira Stages Remarkable Comeback, Soars Over 20% to 794.89/$1 in Official Market Surge

The Nigerian naira marked a substantial recovery against the US dollar on November 24, 2023, culminating in a record high closure at N794.89/$1 in the official market. This noteworthy appreciation of 20.31% provided a welcomed relief for analysts who anticipated that the Central Bank of Nigeria’s (CBN) recent clearing of some FX backlog would instill confidence in the currency.

Data from the NAFEM, the official forex trading platform, revealed the Naira’s closure at N794.89 to a dollar, signifying a 20.31% increase from its previous day’s close of N956.33. The intraday high reached N1136/$1, while the intraday low was N700.00/$1, reflecting a substantial spread of N436/$1. Forex turnover at the close amounted to $75.82 million, indicating a 28.13% decline compared to the previous day’s figures.

In the parallel forex market, where unofficial trading occurs, the naira also exhibited strength, appreciating by 0.87% to be quoted at N1155/$1. Peer-to-peer traders quoted approximately N1151.22/$1.

Financial analysts weighed in on the situation, emphasizing the critical role of confidence in maintaining a stable exchange rate. Olatunde Amolegbe, the former President and Chairman governing council of the Chartered Institute of Stockbrokers (CIS) and the Managing Director of Arthur Steven Asset Management Limited, highlighted the importance of confidence for both foreign and local investors. He expressed optimism about the CBN’s decision to clear FX commitments, emphasizing the positive impact on market confidence, though he anticipated its manifestation in the medium term.

Amolegbe also emphasized the need for deliberate efforts to effect structural changes that encourage import substitution, such as improving security, enhancing infrastructure, attracting foreign direct investments, and promoting local production. Acknowledging the limitations of monetary policy tools in reducing currency speculation, he called for a comprehensive approach.

Bismarck Rewane, the Managing Director/CEO of Financial Derivatives Company Limited, added his perspective, stating in a report that the naira’s volatility is expected to persist due to lingering concerns about forex supply. The scarcity of the dollar is anticipated to fuel speculative buying, with a growing number of market participants opting for long positions on the dollar while shorting the naira.

In conclusion, the recent surge in the value of the Nigerian naira against the US dollar has provided a glimmer of hope, but analysts caution that sustained efforts and structural changes are essential for long-term stability and confidence in the foreign exchange market.