The naira appreciated by three per cent against the dollar in the parallel market over the past week, closing at N1,570/$1 on Friday, gaining N50 within five days.
The nation’s currency however experienced a marginal decline on the official Nigerian Foreign Exchange Market (NFEM) market closing at N1,502.5/$1.
The currency opened the week at N1,620/$1 in the parallel market on Monday before strengthening to N1,610/$1 on Tuesday as dollar supply improved. By Wednesday, it appreciated further to N1,605/$1, maintaining its upward momentum at N1,595/$1 on Thursday. On Friday, it closed at N1,570/$1, marking its strongest level in a week.
Meanwhile, the official market rate remained relatively stable, closing at N1,499/$1 on Monday and gradually adjusting to N1,502/$1 on Thursday, with Friday’s marginally declining to N1,5052.5.
Market analysts attributed the naira’s recent appreciation to a combination of factors, including increased foreign exchange inflows and policy measures aimed at stabilising the currency. The successful issuance of Nigeria’s Eurobond and the domestic dollar-denominated federal government bond has provided much-needed liquidity, easing pressure on the exchange rate.
Head of Financial Institutions Ratings at Agusto & Co., Ayokunle Olubunmi, pointed to the role of FX inflows and structural shifts in fuel imports in shaping the current trajectory of the naira.
He said: “The impact of high USD inflows, given the success of the Eurobond and the domestic FGN bond, has supported the exchange rate. Similarly, the uptick in domestic production of Premium Motor Spirit (PMS), Nigeria’s highest import, has moderated FX demand to an extent. In addition, the CBN’s reforms to sanitise the FX market have helped stabilise the exchange rate.”
Similarly, Tilewa Adebajo, Chief Executive of CFG Advisory, highlighted the importance of transparency in FX pricing and the role of policy reforms in restoring market confidence. He said: “The FX system with Bloomberg now has transparency with bid and offer rates. The parallel market operators have to be educated and weaned off the mentality that they need to price 50-100 naira above a market price. The CBN governor has said repeatedly the need for price discovery, which is where the market is going. The removal of subsidies has been completed, and stability should be restored to the economy with inflation on a downward trajectory. With speculation out of the way and confidence returning to the economy and polity, this is what is driving down rates. The reforms have been concluded, and it is time to deal with the fallout.”
Another analyst, who requested anonymity, suggested that the naira’s appreciation was also linked to direct CBN interventions. He noted that the timing coincided with increased forex allocations to Bureau de Change (BDC) operators.
He said: “The naira’s recent strength is largely due to increased FX supply from the CBN.”
