Naira Strengthens Officially, Weakens on Parallel Market

The Nigerian naira witnessed a contrasting performance in forex trading on Monday, with a rise noted at the official window and a decline observed in the parallel market. The positive movement at the official forex window came after reassurances from the Central Bank of Nigeria (CBN) Governor, Olayemi Cardoso, regarding efforts to address currency volatility.

Official data from the Financial Markets Dealers Quotations (FMDQ) revealed that the naira appreciated by 1.09 percent, closing at 1,419.86 against the dollar. This marked an improvement from Friday’s rate of 1,435.53 per dollar.

Last Tuesday, the naira had hit a record low of 1482.57 against the dollar at the official window, despite interventions by the CBN and the Federal Government to enhance liquidity in the forex market. However, following a series of policy announcements from the CBN, the local currency managed to bounce back.

In contrast, the naira’s performance on the parallel market was less favorable, trading between 1,440 and 1,460 against the dollar at the close of Monday’s trading session, as reported by Bureau de Change operators. This was slightly lower than Friday’s closing rate of 1,450 per dollar.

BDC operators in Abuja attributed the dollar’s gradual gain against the naira to activities by currency hoarders. Mr. Abubakar Abdusallam, a BDC operator at the Sheraton Hotel, stated that they were selling dollars at 1,455 per dollar while buying at 1,445 per dollar. Meanwhile, another operator, Surajo Sani, reported trading dollars at 1,440 per dollar, reflecting the market dynamics.

Addressing concerns about currency stability, CBN Governor Olayemi Cardoso highlighted ongoing efforts to address forex supply bottlenecks. He mentioned improvements in remittance flows, reduced bank position-holding, and the repatriation of export proceeds to bolster liquidity. Cardoso also emphasized the importance of addressing fundamental economic issues like inflation and promoting local business growth to ensure long-term currency stability.

Furthermore, Cardoso disclosed that the CBN had settled verified forex requests totaling $2.3 billion, with $2.2 billion remaining to be paid shortly. He noted challenges with a $7 billion forex backlog inherited by the current administration, citing issues like invalid import documents and nonexistent entities.

In related developments, FTSE Russell downgraded Nigeria from a “frontier” to an “unclassified” market in September 2023 due to difficulties faced by foreign investors in repatriating funds. The CBN initiated the clearing of forex backlogs in banks in November 2023 as part of broader efforts to enhance forex liquidity and stability.

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