The foreign exchange (forex) landscape experienced a notable shift as forex turnover witnessed a 17.36% decline to $145.89 million. This comes in tandem with a marginal depreciation of the Nigerian naira against the US dollar on Friday, January 19th, 2024, affecting both official and black markets.
At the close of business, the domestic currency depreciated by 0.04%, settling at N902.45 to a dollar, as reported by data from the Nigerian Autonomous Foreign Exchange Market (NAFEM), the official forex trading platform.
This slight decrease represents a N0.37 loss or a 0.04% reduction compared to the previous day’s closing rate of N902.08.
The intraday trading range saw a high of N1200/$1 and a low of N467/$1, indicating a substantial spread of N733/$1.
According to data sourced from the official NAFEM window, the total forex turnover at the conclusion of trading was $145.89 million, reflecting a 17.36% decrease compared to the preceding day.
In parallel markets where forex is traded unofficially, the naira also experienced a 1.85% decrease, quoting an exchange rate of N1350/$1. Peer-to-peer traders quoted around N1350.60/$1.
Insights from Financial Experts
Renowned financial experts have shared their perspectives on the current forex scenario. Mr. Olatunde Amolegbe, the former President and Chairman of the Governing Council of the Chartered Institute of Stockbrokers (CIS), and the Managing Director of Arthur Steven Asset Management Limited, stressed the crucial role of confidence in maintaining a stable exchange rate.
Amolegbe emphasized, “Confidence is what makes foreigners want to come to invest in your country and makes locals want to keep their investments here. In the absence of these dynamics, demand will naturally outstrip supply, leading to the sort of instability we are experiencing now.”
He expressed optimism about the positive impact of clearing FX commitment backs on market confidence, though acknowledging that the desired effects might manifest in the medium term.
Bismarck Rewane, the Managing Director/CEO of Financial Derivatives Company Limited, highlighted in a report that the naira is expected to remain volatile due to lingering forex supply concerns. He noted that the scarcity of dollars could lead to speculative buying, with more market participants opting for long positions on the dollar while shortening the naira.
As the forex market continues to evolve, experts suggest that deliberate efforts are needed to effect structural changes, including improved security, better infrastructure, increased foreign direct investments, and support for local production, to foster stability.
