Over the past two weeks, the Central Bank of Nigeria (CBN) and other banking institutions have bolstered the supply of dollars to the foreign exchange market by a substantial $2.5 billion, resulting in a strengthening of the naira to N1,309 against the United States dollar.
According to official data from the FMDQ Securities Exchange, the naira closed at N1,309/$1 on Thursday, compared to N1,300/$1 the previous day. Although this represents a notable improvement, it still marks a continuation of the naira’s recent strengthening trend against the US dollar, reaching an eight-week low.
Trading activities were halted on Friday due to a public holiday.
In tandem with this surge in dollar supply, forex transactions between willing sellers and buyers at the Nigerian Autonomous Foreign Exchange Market skyrocketed by 106 percent to $857 million by the end of Thursday’s trading session, marking the highest level since the implementation of the CBN’s new forex policies. This surge also represents the largest turnover since 2021, with the closest figure being $760 million on June 2nd, 2022.
The average daily forex turnover for March has hovered around $220 million, reflecting a significant increase from the $177 million recorded as the daily average turnover this year.
Notably, the CBN made a total sale of $1 billion in the penultimate week.
Analyzing the FX trading data, the intraday high closed at N1,392 on Thursday, up from N1,460 per dollar on Wednesday, while the intraday low appreciated to N1,250 on Thursday compared to N1,200 closed on Wednesday.
This liquidity surge in the forex market can be attributed to a series of policy reforms implemented by the CBN. These reforms include the unification of exchange rate windows, liberalization of the FX market, clearance of FX backlog obligations for banks and airlines, implementation of a Price Verification System, imposition of limits on banks’ Net Open Position, removal of the daily cap of N2 billion on remunerable Standing Deposit Facility, and overhaul of the Bureau De Change segment.
Forex turnover is a crucial metric in the financial realm, reflecting the total value of all foreign exchange transactions completed within a specific timeframe, providing insights into the liquidity and vibrancy of the forex market.
On the official end of the market, the CBN has been proactive in addressing suspected cases of excessive foreign currency speculation and hoarding from Nigerian banks, while also ensuring the complete clearance of the valid foreign exchange backlog, settling obligations to bank customers.
Meanwhile, at the parallel market, the naira’s appreciation trend continues, with the US dollar currently selling at N1,280, reflecting the recent foreign exchange policy measures of the Central Bank of Nigeria.
