Naira Gains Ground: Trades at 864/$ Amidst Surge in Dollar Supply at Official Market

In a surprising turn of events on Monday, the Nigerian naira experienced a notable appreciation, marking a 27.16% gain to close at N864.29/$ on the official Investors and Exporter window. The substantial increase was accompanied by a significant uptick in the daily turnover of the dollar, soaring by 86.83% to reach $132.46 million at the close of trading, up from $70.90 million the previous Friday. This positive movement indicates a noteworthy N234.76 gain from the alarming all-time low of N1099.05/$ recorded in the preceding week, as revealed by data from the FMDQ Securities Exchange.

The day’s trading activity began at N867/$, reaching a high of N1185.10/$ before dipping to a low of N720/$. Ultimately, the naira settled at N864.29/$, aligning with the increased daily turnover of the dollar at $132.46 million. This modest recovery brings relief to the national currency, which has experienced volatility since the Central Bank of Nigeria’s decision to remove the rate cap.

Amidst the effort to unify rates, the country’s foreign exchange reserves have faced a decline of approximately $1.6 billion, reaching $32.97 billion. This reduction in FX reserves is considered a contributing factor to the downward trajectory of the naira.

A recent report from the Economist Intelligence Unit emphasized Nigeria’s insufficient ammunition in its FX arsenal to defend its exchange rate unification policy. The report highlighted concerns about the unsupportive monetary policy in Nigeria, predicting that the naira would remain under pressure. The central bank’s perceived lack of firepower to adequately supply the market or clear a backlog of foreign exchange orders was identified as a key challenge, likely keeping foreign investors on edge. The report further warned that high inflation and continued disparities with the parallel market could lead to an unstable exchange rate regime, prompting periodic devaluations.

Olayemi Cardoso, the CBN Governor, addressed Nigeria’s ongoing efforts to stabilize its exchange rates. He announced the central bank’s intention to release new FX guidelines, aiming to rescue the market from its current uncertainties. According to Cardoso, ensuring the proper functioning of domestic and foreign currency markets requires clear, transparent, and harmonized rules governing market operations. The central bank plans to develop new foreign exchange guidelines and legislation, engaging in extensive consultations with banks and FX market operators before implementing any new requirements.

In the midst of these developments, Infostride News continues to closely monitor the dynamics of Nigeria’s currency and financial markets, providing timely and insightful updates to keep the public informed.