Tuesday saw a persistent increase in exchange rates relative to the US dollar, defying the previous downward trend in the forex markets due to sales of foreign currency to deposit money banks, bureau de change (BDCs), and FX backlog settlement, all of which promote confidence.
The amount of US dollars available at the official window sufficiently satisfied the demand for foreign currency at the official window after the monetary authority made many attempts to reduce negative FX movement through policy measures. The value of the naira has been continuously increasing since last week.
The FX market provided data indicating that the naira strengthened by 1.78%, ending at ₦1,382.95 per US dollar at the official market. Following the peak, the Naira closed at ₦1,300 to the US dollar after the apex bank sold $10,000 to the Bureau de Change operators at N1251.
According to analysts speaking with MarketForces Africa, the apex bank is better able to regulate the direction of the FX market thanks to the capping of FX spread on the US dollar injected into BDCs. Based on information provided by FMDQ Securities Exchange, the naira ended the day at N1382 on the Nigerian autonomous foreign exchange market.
Yemi Cardoso, the governor of the CBN, announced at the policy committee meeting that the apex bank has settled verified forward contracts and that all legitimate backlogs in foreign exchange have been cleared.
A third party reconciliation determined that $2.4 billion of the $7 billion in total FX obligations were invalid. The infractions noted for forex forwards deliverable deemed invalid include no Form M and/or allocations made with no requests or the absence of naira equivalent.
Law enforcement agencies are looking into void forward contracts, according to the authority. However, the CBN committee expressed satisfaction with the degree of stability the foreign exchange market has attained over the last few weeks.
This demonstrates the impact of the CBN’s recent actions and policy adjustments, as well as increased market transparency.
Analysts surmise that the decision to reduce the FX backlog has bolstered investor confidence and drawn foreign capital to Nigeria. The exchange rate has increased by 13% at the official window since the last MPC meeting in February, according to CardinalStone’s report.
The CBN affirmed its commitment to sustaining its intervention in the FX market to ensure that the naira remains stable while building confidence in the market in the medium term.
