LAGOS, Nigeria (VOICE OF NAIJA)–The Nigerian naira has started the new month with a strong performance, trading below 1,280 against the US dollar in both official and parallel markets.
This marks a significant appreciation compared to last week’s rate of 1,309.39 per dollar, with an increase of N30.81 at the close of trading.
Data from FMDQ Securities reveals that this is the first time since January 26 that the indicative exchange rate for the Nigerian Autonomous Foreign Exchange Market has fallen below the N1,300 mark.
The naira had experienced a low point of N1,615 per dollar on March 13, 2024.
Since the implementation of several forex policies by the central bank, the Nigerian naira has appreciated by over 21 percent against the US dollar since March.
The increased liquidity in the forex market is credited to a range of policies currently enforced by the CBN.
Key reforms encompass the consolidation of exchange rate windows, opening up of the FX market, resolution of FX backlog obligations for banks and airlines, introduction of a Price Verification System, imposition of limits on banks’ Net Open Position, lifting of the daily cap of N2bn on remunerative Standing Deposit Facility, and revamp of the Bureau De Change segment.
Forex turnover is a crucial measure in finance, reflecting the total value of foreign exchange transactions conducted within a certain period.
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It offers valuable insights into the liquidity and activity of the forex market.
Elevated turnover rates suggest a dynamic market with many participants trading currencies, indicating investor confidence and economic robustness.
Over the past two weeks, the Central Bank of Nigeria and other banking institutions have enhanced dollar supply to the foreign exchange market by $2.5 billion.
However, forex transactions between willing sellers and buyers at the Nigerian Autonomous Foreign Exchange Market decreased by 106 percent to $111.18 million on Tuesday, down from $857 million at the close of trading activity last Thursday.
The summary of FX trading shows that the intraday high closed at N1,312, down from 1,392 per dollar last Thursday.
Similarly, the intraday low remained at N1,250, the same as last Thursday.
Trading resumed on Tuesday after the Easter holiday, with the Naira strengthening in the parallel market to N1,220. Bureau De Change operators bought at N1,220 per dollar and sold to customers, either through cash or transfer, at N1,265 per dollar, making a profit margin of N30.
This marks a 1.99 percent appreciation over the N1,280 rate recorded last week. The Naira strengthened in both the official and parallel markets after the Central Bank of Nigeria cleared all verified FX backlogs, totaling $1.5 billion.
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With a 21.8 percent appreciation in March 2024, the Naira is expected to continue this trend in April, in line with the Central Bank’s policy measures.
Currency traders interviewed by The PUNCH attributed the naira’s appreciation to decreased demand for the US dollar and the Central Bank’s decision to sell foreign exchange to operators.
According to Ibrahim Yahu, a BDC operator at Wuse Zone 4, 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 new fresh drop of the dollar. The CBN selling directly to us has really helped trading activities.”
Another trader, Malam Yunusa, expressed confidence in the naira’s continued strengthening and highlighted operators’ desire for its growth.
President of the Association of Bureaux de Change Operators of Nigeria, Aminu Gwadabe, highlighted that alongside monetary policy tightening and increased investment in government instruments, the reactivation of BDCs has significantly boosted dollar liquidity in the retail forex market.
Analysts at Afrinvest foresee the naira trading within a similar range in April, as the Central Bank of Nigeria maintains efforts to reduce liquidity and attract additional capital.