In a notable development on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, the naira appreciated to N1,570/$1 on Thursday, reflecting a significant gain of 2.47% from the previous day’s rate of N1,608.73/$1. This marks the naira’s best performance in two weeks, following the Central Bank of Nigeria’s (CBN) recent efforts to bolster forex liquidity.
Market Reaction and Recent Trends
The recent appreciation is the highest one-day increase since July 22, 2024, when the CBN resumed selling foreign exchange to authorized dealers. According to FMDQ data, the naira had previously breached the N1,600 ceiling, a milestone it has now moved below with this recovery.
Despite trading within a volatile range—reaching a low of N1,551 and a high of N1,631—the naira’s recent performance indicates a gradual recovery from significant losses incurred last week. On Wednesday, the currency had already shown signs of rebound, appreciating by 0.77% and ending a six-day losing streak.
FX Turnover Fluctuations
However, the forex turnover has shown instability. On Wednesday, it surged by 62.81% to $270.81 million but then dropped by 47.45% to $142.32 million on Thursday. This fluctuation may point to reduced trading activity or a limited dollar supply in the official market.
Central Bank’s Interventions
In a bid to stabilize the naira, the CBN sold a cumulative $148 million to 29 authorized dealers last week, at exchange rates ranging between N1,470/$1 and N1,510/$1. This intervention was the third in July, aimed at enhancing liquidity in the FX market.
Moreover, the CBN had previously announced the sale of $106.5 million to 29 FX dealer banks on July 18 and 19, 2024, at rates from N1,498/$1 to N1,530/$1. During the same period, the CBN also purchased $9.5 million from four dealer banks at rates between N1,510/$1 and N1,550/$1.
Two weeks prior, the CBN sold an additional $122.67 million to 46 authorized dealers. In another move to support the naira, the CBN approved the sale of FX to eligible Bureau De Change (BDC) operators, allotting $20,000 to each at a rate of N1,450/$1, reflecting the lower band of the trading rate on the NAFEM from the preceding trading day.
Context and Outlook
These measures come amid heightened demand pressure on the naira, exacerbated by a 10-day nationwide protest against hunger and poor governance. The CBN’s actions demonstrate its commitment to mitigating forex shortages and stabilizing the local currency.
Analysts believe that continued intervention by the CBN is crucial for maintaining this positive trend. With the naira showing signs of recovery, sustained efforts to improve forex liquidity and manage demand pressures are essential for long-term stability.
As Nigeria navigates these economic challenges, the central bank’s proactive measures and the market’s response will be closely watched by investors and policymakers alike.
