In a positive turn of events for the Nigerian economy, the domestic currency experienced a 0.17% appreciation, closing at N888.35 to a dollar at the end of business, according to data from the Nigerian Autonomous Foreign Exchange Market (NAFEM). This marks a N1.51 gain or a 0.17% increase compared to the previous close of N889.86 on Friday.
The intraday high and low recorded were N1249/$1 and N720/$1, respectively, revealing a significant spread of N529/$1. Forex turnover at the close of trading at the official NAFEM window stood at $137.82 million, reflecting a substantial 230.82% increase compared to the previous day.
Simultaneously, the naira gained marginally at the parallel forex market, where it was quoted at N1235/$1, representing a 0.81% gain over the previous day’s closing rate. Peer-to-peer traders quoted around N1214.10/$1.
The Central Bank of Nigeria (CBN) made significant strides in addressing forex challenges by making tranche payments to 31 banks to clear the backlog of foreign exchange forward obligations. The apex bank also revealed the implementation of new foreign exchange frameworks aimed at resolving lingering FX issues.
Financial experts weigh in on stability and confidence:
Mr. Olatunde Amolegbe, former President and Chairman governing council of the Chartered Institute of Stockbrokers and Managing Director of Arthur Steven Asset Management Limited, emphasized the importance of market and participants’ confidence for exchange rate stability. He noted that clearing FX commitments would positively impact market confidence, but the desired results might manifest in the medium term.
Bismarck Rewane, Managing Director/CEO of Financial Derivatives Company Limited, highlighted concerns over lingering forex supply issues, predicting continued volatility for the naira. The scarcity of dollars could lead to speculative buying, with more market participants opting for long positions on the dollar while shorting the naira.
Rewane’s report suggests that while efforts to reduce currency speculation through monetary policy tools are commendable, deliberate structural changes are crucial for long-term stability. These changes include improved security, enhanced infrastructure, increased foreign direct investments, and support for local production to encourage import substitution.
As Nigeria navigates its forex challenges, stakeholders are closely monitoring the impact of recent interventions and policy measures on the stability of the exchange rate.