By Taiwo Adebowale, Senior Business Correspondent
VICTORIA ISLAND, Lagos — The Nigerian naira has begun the month on a robust note, appreciating against the United States dollar to N1,278.58 from N1,309.39 per dollar, marking a significant increase of N30.81 at the close of trading activity. This resurgence in the value of the naira follows a series of forex policy reforms by the Central Bank of Nigeria (CBN), aiming to stabilize the currency and enhance liquidity in the foreign exchange market.
Naira’s Recent Performance:
Data from FMDQ Securities reveals that the naira’s indicative exchange rate in the Nigerian Autonomous Foreign Exchange Market closed below the N1,300 ceiling for the first time since January 26, 2024. This marks a notable turnaround from the naira’s depreciation to as low as N1,615/$1 on March 13, 2024. Since the introduction of CBN’s forex policies, the naira has witnessed a remarkable gain of over 21 per cent against the dollar since March.
Impact of Forex Policies:
The recent appreciation of the naira can be largely attributed to the various forex policy reforms implemented by the CBN. These reforms include the unification of exchange rate windows, liberalization of the FX market, clearance of FX backlog obligations for banks and airlines, and the implementation of a Price Verification System, among others. These initiatives have significantly boosted liquidity in the forex market, fostering increased investor confidence and economic stability.
Forex Turnover and Market Activity:
Forex turnover, a crucial metric in assessing market vibrancy, has seen a substantial increase in recent weeks, reflecting heightened activity in the forex market. The CBN and other banking institutions injected $2.5 billion into the forex market, further bolstering liquidity. However, forex transactions at the Nigerian Autonomous Foreign Exchange Market reduced by 106 per cent to $111.18 million on Tuesday from $857 million recorded last week Thursday.
Parallel Market Dynamics:
At the parallel market, the naira appreciated to N1,220 against the dollar, with Bureau De Change operators buying at N1,220 per dollar and selling to customers at N1,265/$, representing a 1.99 per cent appreciation over the previous week’s rate. This positive trend in both the official and parallel markets follows the CBN’s clearance of all verified FX backlogs, amounting to a final tranche of $1.5 billion.
Factors Driving Naira Appreciation:
Currency traders attribute the naira’s appreciation to decreased demand for the dollar and the CBN’s proactive intervention in selling foreign exchange to operators. The direct sale of forex to Bureau De Change operators by the CBN has significantly bolstered trading activities and contributed to the naira’s strengthening. Additionally, the reactivation of Bureau De Change operations has enhanced dollar liquidity in the retail segment of the forex market.
Outlook and Predictions:
Looking ahead, analysts forecast that the naira will maintain its upward trajectory in April, supported by continued CBN interventions and efforts to attract more capital into the economy. The tightening of monetary policy, increased investment in government instruments, and the clearance of forex backlog commitments have further contributed to the naira’s resilience and stability. As the CBN continues its activities to mop up liquidity and stimulate capital inflows, the naira is poised to sustain its gains against the dollar.
Conclusion:
The recent appreciation of the naira below 1,280/$ reflects Nigeria’s ongoing efforts to address currency challenges and foster economic stability. With robust forex reforms and proactive interventions by the CBN, the naira is gradually regaining strength and resilience in the foreign exchange market. As the nation navigates through currency crises, the revitalization of the naira serves as a beacon of hope for sustained economic growth and prosperity.
