The Naira experienced a significant depreciation, closing above N1500/$1 in recent trading sessions. This was accompanied by a notable decline in forex turnover, pointing to ongoing challenges in the forex market despite recent policy interventions by the Central Bank of Nigeria (CBN).
Intraday Performance:
The intraday high reached a peak of N1,582 against the US dollar on Wednesday, with an intraday low of N922.38/$1, indicating a wide spread of N659.62/$1. This depreciation reflects a 0.26% decrease in the local currency compared to the previous day’s closing rate of N1499.07.
Forex Turnover:
Data from the Nigerian Autonomous Foreign Exchange Market (NAFEM) revealed a 56.58% decrease in forex turnover, totaling $117.87 million at the close of trading. This decline underscores persisting challenges in forex liquidity despite recent CBN interventions.
Parallel Market:
Similarly, at the parallel forex market, the naira depreciated, with the exchange rate quoted at N1,545/$1, representing a decrease of 1.81% compared to the previous day’s rate of N1,517/$1.
Other Currency Performance:
– The Great British Pound (GBP) marginally depreciated by 0.53% to close at £1/N1,900, while the naira dropped against the Euro by 1.23% to close at N1620/EUR1.
– In the cryptocurrency market, where forex is transacted using stablecoins, the naira crossed N1,587.40/$1.
CBN Reforms:
Recent reforms announced by the Central Bank of Nigeria (CBN) signal a move towards a market-driven exchange rate mechanism. The removal of caps on international money transfer operations and other pivotal changes aim to promote a market-based price discovery system and enhance forex market flexibility.
Market Outlook:
While the CBN’s reforms aim to foster a more liberalized forex regime, challenges persist in the forex market, necessitating continued monitoring and potential policy adjustments to stabilize the currency and improve liquidity.
