On Thursday, the naira saw a little increase in value due to the US dollar’s volume surpassing the overall demand recorded by foreign exchange users at the Nigerian autonomous foreign exchange market. On the other hand, prior rallies were reversed as the exchange rate declined on the parallel market.
The Naira strengthened by 0.43%, closing at ₦1,608.98 per US dollar at the official market, according to data retrieved from the FMDQ platform. This brought the difference in currency rates down to N8.98.
Experts stated that since the FX pricing system was adjusted early this year, the value of the naira has stabilized at roughly N1600. They observed that pressure in the alternative market has decreased as a result of the Central Bank of Nigeria’s (CBN) removal of the licenses for over 4000 Bureau de Change operators.
The exchange rate closed at ₦1, 600 to the US dollar in the parallel market due to increased demand for foreign currency filtered through the alternative market. Liquidity in the market has increased but it has little effect on exchange rate movement. The apex bank reform has caused improved US dollar inflows, but it often gets soaked up by large demand.
The CBN expects exchange rate pressure to reduce; having highlighted that presence of fear and market distortions go into naira pricing, leading to undervaluation of the local currency.
The apex bank revealed that sources of accretion into the nation’s foreign reserves are now being monitored and improved upon. Recall the CBN capped international oil companies’ FX repatriation at 50% of total proceeds to drive liquidity in the market.
Over the past few weeks, there has been a significant spike in the daily FX liquidity at NAFEM window in response to recent circulars and activities. According to Cordros Capital Limited, in the first two weeks in February, the average FX turnover was $440.9 million which then eased to an average of $188.7 million in a subsequent week in the same month.
The firm said current activity has surpassed 2023 average of $113.84, indicating a significant in FX liquidity and flows since the CBN began its campaign to stabilise the market and the economy at large.
In the global commodity market, the price of oil saw an uptick. Brent crude climbed 1.52% to reach $85.31 per barrel, and WTI crude also experienced a 1.96% increase, reaching $81.28 per barrel.
