The Nigerian naira kicked off the new month on a robust note, rallying to an impressive N1,278.58 against the United States dollar at both official and parallel markets. This surge represents a significant uptick from the N1,309.39 recorded last Thursday, marking a notable appreciation of N30.81 in trading activity.
Data sourced from FMDQ Securities reveals that the indicative exchange rate for the Nigerian Autonomous Foreign Exchange Market dipped below the N1,300 threshold, marking the first occurrence since January 26 of this year. This reversal comes after a period of volatility that saw the naira hit a low of N1,615/$1 on March 13, 2024.
The recent strength of the naira can be attributed to a series of forex policies introduced by the Central Bank of Nigeria (CBN), resulting in a remarkable 21% gain against the dollar since March. These policies, aimed at enhancing liquidity and stability in the forex market, have included reforms such as unifying exchange rate windows, liberalizing the FX market, and clearing FX backlog obligations for banks and airlines.
Additionally, the CBN’s measures have led to increased dollar supply, with the forex market benefiting from a $2.5 billion injection over the past two weeks. Despite reduced forex turnover between willing sellers and buyers at the Nigerian Autonomous Foreign Exchange Market, down to $111.18 million from $857 million, the naira has maintained its upward trajectory.
In the parallel market, the naira appreciated to N1,220 against the dollar, with Bureau De Change operators witnessing heightened activity. This positive movement, coupled with the CBN’s direct intervention in selling foreign exchange to operators, has bolstered trading confidence and contributed to the naira’s strengthening.
Currency traders attribute the naira’s appreciation to diminished demand for the dollar and the CBN’s proactive approach in setting favorable exchange rates for traders. The resurgence of Bureau De Change operations, coupled with increased investment in government instruments and the clearance of forex backlog commitments, has further buoyed dollar liquidity in the retail segment of the forex market.
Looking ahead, analysts predict that the naira will maintain its positive momentum in April, supported by continued CBN interventions and efforts to attract more capital inflows. As the CBN remains committed to its forex reforms, the outlook for the naira appears favorable, signaling stability and resilience in Nigeria’s currency market.
