The Nigerian naira witnessed a remarkable surge on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, reaching N1,173.88/$1 on Tuesday. This surge represents a substantial increase of 14.09% from the previous day’s rate and marks the highest one-day appreciation since January 2024. The surge comes amidst a significant surge in foreign exchange (FX) turnover, which soared by 81.59% to $328.32 million.
Data from the Financial Markets Dealers Quotations (FMDQ) revealed that the naira held steady on Monday, May 27, 2024, at the rate of N1,339.33/$1. However, FX turnover on Monday witnessed a notable decrease of 67.50% compared to the previous trading session at the end of the previous week, totaling $180.8 million.
On Tuesday, May 28, 2024, the foreign exchange market experienced a remarkable recovery with turnover climbing to $328.32 million. This sharp increase in value and turnover indicates renewed activity and demand in the FX market, likely driven by interventions and policies aimed at stabilizing the naira.
Analysts attribute the improved exchange rate to the Central Bank of Nigeria’s (CBN) efforts to maintain currency stability amidst fluctuations in market liquidity. Maintaining the naira at this rate amid varying turnover levels indicates a controlled foreign exchange environment, crucial for investor confidence and economic planning.
The surge in FX turnover can be attributed to several factors, including end-of-month financial settlements, increased inflows from foreign investments, and strategic measures by the central bank to ensure sufficient liquidity in the market. Additionally, the appreciation on the official market accompanied auctions of treasury and Open Market Operations (OMO) bills.
Following the 295th meeting of the Monetary Policy Committee (MPC) of the CBN, which saw an increase in the monetary policy rate (MPR) by 150 basis points to a new unprecedented 26.25%, the CBN conducted Nigerian Treasury Bill (NTB) and OMO bill auctions. The NTB auction held on May 22, 2024, saw a total subscription of N1.5 trillion, highlighting continued appetite for fixed-income securities amidst a volatile economic landscape. Similarly, the CBN raised a substantial N1.16 trillion from the OMO bill auction.
These measures form part of the CBN’s efforts to control inflationary pressures and stabilize the naira amidst ongoing economic challenges. By mopping up excess liquidity, the CBN aims to curb inflation, which has been a major concern for policymakers. The amount raised from the auctions is expected to help mitigate inflationary pressures by reducing the amount of money in circulation, thereby supporting the naira and promoting economic stability.
