Naira strengthens, nears 1,000/$ at parallel market

At the end of trade on Monday, the naira was worth N1,136/$ on the official market and N1,050/$ on the parallel market, continuing its recent upward trend vs the US dollar.

This occurred as traders projected that before the week was out, the dollar would drop to less than N1,000.

Data from the FMDQ Exchange, a platform that manages the Nigerian Autonomous Foreign Exchange Market, showed that on Monday, the naira increased by 6.1%, or N69, at the official foreign exchange market, from N1,205/$ on Friday to N1,136/$.

From $281.34 million on Friday to $251.60 million on Monday, the overall daily turnover decreased little.

Significant improvement was also seen in the intraday high, which closed at N1,227 per dollar as opposed to Friday’s price of N1,265 per dollar. The dollar was quoted on the spot at N1,000 on Monday, greater than the N1,100 reported on Friday, meaning that the intraday low increased by N100/$1.

The Central Bank of Nigeria issued a number of foreign exchange instructions with the goal of stabilising the naira, and the improved rate came after them.

As promised by CBN governor Olayemi Cardoso, the apex bank last month said that it had successfully settled all legitimate foreign exchange backlogs, including $7 billion in inherited claims.

The FMDQ data also showed that total inflows into the NAFEM rose to $3.75 billion from $2.64 billion in February, a 41.7% increase and the highest level since March 2019 ($6.07 billion).

In preparation for selling $15.88 million to 1,588 qualified Bureau De Charge operators, the Apex Bank last week evaluated the exchange rate for these operators, bringing it down from N1,251/$1.

The CBN increased its benchmark interest rate, also known as the Monetary Policy Rate, by 200 basis points to 24.75 percent last month from 22.75 percent in February 2024 as part of efforts to rein in inflation and support the naira.

“We anticipate that the naira would continue to strengthen as the CBN intensifies efforts to bolster liquidity in the market,” analysts at Afrinvest said.

At the unofficial market, currency traders at the popular Wuse Zone 4 market complained bitterly about the naira rates, stressing that the business was no longer profitable.

Malam Ibrahim in a chat with our correspondent claimed he bought the dollar between the rate of N950 and N980 and sold between N1,010 and N1,020

According to him, the low demand is making currency traders negotiate below N1,000 as buying price and selling between N1,010 and N1,020.

Another trader confirmed the same rate saying, “The rate is nearing below N1,000/dollar for buying and even for selling. The dollar is crashing very fast. We started buying at N1,030 today but suddenly, the rates started dropping. The business is really slow, and the CBN rate has also affected us. The most painful thing now is that we are buying, but there is no demand to sell, and that is where the challenges are coming from. And that is the reason the rate went down today. I bought at N1,000 today but I can no longer sell at that price. We have even gone below the rate the CBN gave us.

When our correspondent contacted other traders to get an average rate, operators said they were buying at N900 and selling at N940 per dollar.

Last week, an investment company, Goldman Sachs Group, said the Naira had already established itself as the top-performing currency globally in April, adding that the local currency was expected to extend its gains, amid the continuing effective policy management by the Central Bank of Nigeria.

Goldman Sachs economists, who previously forecasted in February that the Naira would strengthen to N1,200/$ in 2024, now anticipate it could surpass this level due to aggressive measures by the central bank, including a total of 600 basis points in interest rate increases during policy meetings in February and March.