In recent developments in Nigeria’s foreign exchange market, the Central Bank of Nigeria (CBN) has taken significant steps to address the ongoing forex crisis. On Tuesday, February 27th, 2024, the official exchange rate between the naira and dollar fell by 2.04% to N1615.94 per US dollar, as reported by data published on the Financial Markets Dealers Quotations (FMDQ) platform, where forex is officially sold.
However, a surprising turn of events occurred on Wednesday, February 28th, 2024, as the dollar experienced a sharp decline against the naira, surging by as much as 13.4% in the early hours of trading. This unexpected appreciation of the local currency came despite the media briefing by the CBN Governor, Olayemi Cardoso, where he outlined various efforts by the central bank to tackle the country’s forex crisis.
One of the notable measures announced by Governor Cardoso during the briefing was the increase in the monetary policy rate to 22.75% from 18.75%, a move aimed at curbing inflation. Additionally, he elucidated several policy initiatives undertaken by the apex bank to mitigate the forex crisis.
Meanwhile, the closing rate of N1,615.94/$1 on the FMDQ platform was notably weaker compared to the rate of N1,301/$1 reportedly sold to Bureau De Change (BDC) operators. The CBN had recently allocated $20,000 to each eligible BDC operator across the country at the rate of N1,301/$1, reflecting the lower band rate of executed spot transactions at the Nigerian Autonomous Foreign Exchange Market (NAFEM) on the previous trading day, February 27, 2024.
This strategic move by the CBN is anticipated to inject much-needed liquidity into the market and stabilize the value of the Naira. Additionally, specific guidelines outlined in the circular distributed to BDC operators aim to prevent excessive mark-ups and protect consumers from price exploitation.
In terms of forex rates across different markets, the naira experienced marginal declines as forex traders recorded a daily turnover of $154.16 million. In the parallel market, where the exchange rate is unofficially sold, the naira strengthened, quoting at N1,630/$1, reflecting a 1.23% gain from the previous day’s rate.
Moreover, the Naira saw gains against other major currencies, including the Euro and the Great British Pound (GBP). On cryptocurrency exchanges, where forex is transacted peer-to-peer (P2P), the exchange rate averaged N1,434, fluctuating between N1606 and N1415 to the dollar over a 24-hour period.
During the MPC meeting, Governor Cardoso also addressed concerns regarding cryptocurrency traders, highlighting issues of illicit flows and suspicious transactions. He specifically cited Binance Nigeria, revealing that $26 billion had passed through the platform from sources and users that the bank could not adequately identify.
