The Nigerian naira continued its upward trend in the parallel market, appreciating to N1,514 per US dollar on Wednesday, February 19, 2025. This marks a notable gain of N11, or 0.72%, compared to the N1,525/$1 recorded the previous day. The sustained appreciation is attributed to the effective implementation of the Central Bank of Nigeria’s (CBN) foreign exchange policies by commercial banks and Bureau De Change (BDC) operators.
Meanwhile, the official market remained stable, with the naira closing at N1,510/$1 on the same day, unchanged from Tuesday’s rate. Data from the CBN revealed that the intra-day high and low rates were N1,513 and N1,507, respectively, with a weighted average rate of N1,510. This performance has further narrowed the gap between the official and parallel market rates to just N4, signaling improved market stability.
CBN’s Strategic Moves Boost Naira’s Performance
The naira’s recent gains have been linked to several factors, including the CBN’s decision not to renew US dollar swap agreements with commercial banks. This move has left banks with significant dollar liquidity, which has positively impacted the forex market. Additionally, the increasing participation of banks in selling interbank proceeds to BDCs has further strengthened the local currency.
Aminu Gwadebe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), praised the CBN and fiscal authorities for their transformative leadership. In a statement, Gwadebe highlighted the role of BDCs in effectively transmitting the CBN’s forex policies. He described the naira’s appreciation as “phenomenal and exciting,” attributing it to the CBN’s resilient strategies and the non-renewal of dollar swaps with banks.
Gwadebe also emphasized the commitment of BDC operators to supporting the CBN’s vision of market transparency, investor confidence, and timely information dissemination. He noted that the CBN’s decision to halt dollar swaps with banks has significantly boosted forex liquidity in the banking sector.
CBN’s Revised Guidelines and Extended Deadlines
In December 2024, the CBN introduced revised guidelines for the Nigerian Foreign Exchange Market (NFEM), allowing licensed BDCs to purchase forex directly from authorized dealers. This move aimed to curb market volatility and reduce the gap between official and parallel market rates. However, BDCs faced challenges due to the reluctance of some banks to comply with the new guidelines.
In response to appeals from BDC operators, the CBN extended the deadline for weekly forex purchases from January 31, 2025, to May 30, 2025. This extension provided BDCs with more time to adapt to the new framework and ensure smoother implementation.
Market Outlook
The naira’s recent performance reflects the positive impact of the CBN’s policies and the collaborative efforts of banks and BDCs. As the gap between the official and parallel market rates continues to narrow, market analysts remain optimistic about the naira’s stability and the broader economic implications.
The CBN’s strategic decisions, including the non-renewal of dollar swaps and the revised forex guidelines, have played a crucial role in enhancing market transparency and boosting investor confidence. Stakeholders are hopeful that these measures will sustain the naira’s upward trajectory and contribute to Nigeria’s economic recovery.
