In a significant turn of events, the Nigerian naira witnessed a remarkable recovery against the dollar on Monday, December 4, 2023, closing at N837.77/$1 at the official market. This positive trajectory aligns with the expectations of experts, who foresaw a boost in confidence for the currency following the Central Bank of Nigeria’s (CBN) initiative to clear a portion of its foreign exchange (FX) backlog.
According to data from the Nigerian Autonomous Foreign Exchange Market (NAFEM), where forex is officially traded, the domestic currency appreciated by 10.67%, closing at N837.77 to a dollar at the end of Monday’s business. This marks an impressive N89.42 gain or a 10.67% increase compared to the closing rate of N927.19/$1 on the previous Friday.
During the trading day, the naira experienced an intraday high of N1021/$1 and an intraday low of N701/$1, indicating a wide spread of N320/$1. The forex turnover at the close of trading was $73.94 million, showing a significant 32.87% growth compared to the previous day.
However, in the parallel forex market where forex is sold unofficially, the naira closed flat at the exchange rate of N1165/$1, consistent with the rate recorded on Friday. Peer-to-peer traders quoted around N1161.55/$1.
The CBN, addressing the foreign exchange challenges, revealed that it made tranche payments to 31 banks to clear the backlog of foreign exchange forward obligations. Yemi Cardoso, the governor of the CBN, provided insights into these efforts during the bankers’ dinner in Lagos. Cardoso emphasized the improvements in FX market liquidity in recent weeks and the positive response to tranche payments, aiming to rebuild foreign exchange reserves to levels comparable with similar economies.
In the context of Nigeria’s struggles with foreign exchange illiquidity and the burden of clearing its forex backlog, the recent surge in the naira’s value reflects a positive development in the country’s economic landscape. Analysts will be closely monitoring future market dynamics and the CBN’s ongoing efforts to address foreign exchange challenges.