The Nigerian currency, the naira, kicked off the new month on a positive note, strengthening to N1,278.58 against the United States dollar compared to last week Thursday’s rate of N1,309.39 per dollar. This represents an increase of N30.81 by the close of trading activities.
Data from FMDQ Securities reveals that the indicative exchange rate for the Nigerian Autonomous Foreign Exchange Market fell below the N1,300 threshold for the first time since January 26 of this year.
On March 13, 2024, the naira had weakened to as low as N1,615/$1.
Since the implementation of various forex policies by the central bank, the naira has appreciated by over 21 per cent against the dollar since March. This liquidity in the forex market is attributed to several policies currently enforced by the CBN.
Notable reforms include the consolidation of exchange rate windows, liberalization of the FX market, clearance of FX backlog obligations for banks and airlines, implementation of a Price Verification System, imposition of limits on banks’ Net Open Position, removal of the daily cap on remunerable Standing Deposit Facility, and overhaul of the Bureau De Change segment.
Forex turnover is a crucial metric in the financial realm as it reflects the total value of all foreign exchange transactions completed within a specific period, providing insights into forex market liquidity and activity.
High turnover rates indicate a vibrant market with numerous participants engaging in currency trading, signalling investor confidence and economic stability.
In the past two weeks, the Central Bank of Nigeria and other banking institutions have bolstered dollar supply to the forex market by $2.5bn. Conversely, forex transactions at the Nigerian Autonomous Foreign Exchange Market between willing buyers and sellers decreased by 106 per cent to $111.18m on Tuesday from $857m recorded at the close of trading activities last week Thursday.
FX trading data shows that the intraday high closed at N1,312 compared to N1,392 per dollar last Thursday, while the intraday low remained at N1,250 as it traded last Thursday.
Following the Easter holiday, forex trading resumed on Tuesday, with the naira appreciating at the parallel market to N1,220. Bureau De Change operators purchased at N1,220 per dollar and sold to customers either in cash or via transfer at N1,265/$ with a profit margin of N30.
This represents a 1.99 per cent appreciation over last week’s closing rate of N1,280.
The naira strengthened in both the official and parallel market segments following the Central Bank of Nigeria’s move to clear all verified FX backlogs (final tranche of $1.5bn).
Currency traders, as reported by The PUNCH, attribute the naira’s appreciation to reduced demand for the greenback and the CBN’s decision to supply foreign exchange to operators.
A BDC operator at Wuse Zone 4, Ibrahim Yahu, stated, “The demand for dollars has really gone down and the naira is appreciating because of the new rate determined by the CBN for traders.
The CBN initially started selling to us at N1,251 but they gave another rate last week Thursday at N1,190 and that is the reason for the new fresh drop of the dollar. The CBN selling directly to us has really helped trading activities.”
Another trader, Malam Yunusa, stated that the naira was poised to maintain its gain against the dollar adding that operators also want the naira to grow.
The President of the Association of Bureaux de Change Operators of Nigeria, Aminu Gwadabe, recently noted that apart from the tightening of monetary policy resulting in interest rate hikes, increased investment in government instruments, and the clearance of $7 billion forex backlog forward commitments, the reactivation of the BDCs has notably enhanced dollar liquidity in the retail segment of the forex market.
Analysts at Afrinvest also predicted that the naira would trade within a similar band in the month of April as the CBN continues its activities to mop up liquidity and attract more capital.
