Naira trades below 1280/$ at official, parallel Markets

The naira started the new month on a bullish note, appreciating to N1,278.58 against the US dollar from N1,309.39 per dollar recorded on Thursday last week. This indicates an increase of N30.81 at the close of business.

According to data from FMDQ Securities, the indicative exchange rate for the Nigerian Autonomous Foreign Exchange Market closing below the N1,300 ceiling marks the first time since January 26 this year.

The naira depreciated to N1,615/$1 on March 13, 2024.

Since the introduction of a series of foreign exchange policies by the central bank, the naira has gained more than 21 percent against the dollar since March.

The liquidity in the foreign exchange market has been attributed to a number of policies currently implemented by the CBN.

Key reforms include unification of exchange rate windows, liberalization of the foreign exchange market, settlement of outstanding foreign exchange obligations for banks and airlines, implementation of a price verification system, imposition of limits on banks’ net open position and removal of the N2 billion daily limit. on the remunerable Permanent Deposit Line and the review of the Exchange Offices segment.

Forex turnover is a fundamental metric in the financial world as it represents the total value of all forex transactions completed within a specific time period, providing insight into the liquidity and vitality of the forex market.

High turnover rates indicate a very active market with numerous participants involved in buying and selling currencies, which can indicate investor confidence and economic stability.

In the last two weeks, the Central Bank of Nigeria and other banking institutions improved the supply of dollars to the foreign exchange market by $2.5 billion.

Similarly, foreign exchange transactions between willing sellers and buyers at the Nigerian Autonomous Foreign Exchange Market fell by 106 percent to $111.18 million on Tuesday from $857 million at the close of business on Thursday from last week.

The forex trading summary revealed that the intraday high closed at 1,312 naira from 1,392 per dollar last Thursday. Also, the intraday low remained at N1,250 which was traded last Thursday.

The foreign exchange market resumed on Tuesday after the Easter holidays and the naira appreciated in the parallel market to N1,220. Exchange office operators bought at N1,220 per dollar and sold in cash or by transfer to customers at N1,265/$ with a profit margin of N30.

This represents an appreciation of 1.99 percent from the 1,280 naira closed last week.

The Naira strengthened in both the official and parallel market segments following the Central Bank of Nigeria’s decision to clear all verified foreign exchange arrears (final tranche of $1.5 billion).

The Naira, which appreciated by 21.8 percent month-on-month in March 2024, is expected to maintain the trend in April, following the Central Bank’s policy measures.

Forex traders, who spoke with The punch attributed the appreciation of the naira to declining demand for the greenback and the decision of the apex bank to sell foreign exchange to traders.

Ibrahim Yahu, BDC operator in Wuse Zone 4, said: “Demand for dollars has really decreased and the naira is appreciating due to the new exchange rate determined by the CBN for traders.

The CBN initially started selling to us at 1,251 naira, but on Thursday last week they gave us another exchange rate at 1,190 naira and that is the reason for a new drop in the dollar. The CBN selling directly to us has really helped business activities.”

Another trader, Malam Yunusa, said the naira was set to maintain its gain against the dollar, adding that traders also want the naira to grow.

The President of the Association of Nigerian Foreign Exchange Operators, Aminu Gwadabe, recently noted that apart from the tightening of monetary policy which resulted in increases in interest rates, increased investment in government instruments and liquidation of commitments With arrears of $7 billion in foreign exchange, the revival of BDCs has markedly improved dollar liquidity in the retail segment of the foreign exchange market.

The Afrinvest analyst also predicted that the naira would trade within a similar band in the month of April as the CBN continues its activities to absorb liquidity and attract more capital.