The Nigerian naira has seen a remarkable appreciation of over 7%, now trading at N1,539.65 against the US dollar in the official foreign exchange (FX) market. This positive shift is primarily attributed to the Central Bank of Nigeria’s (CBN) proactive measures aimed at recalibrating the exchange rate dynamics.
On Wednesday, market participants were surprised by the CBN’s unexpected sales of US dollars to authorized dealer banks, a strategic initiative designed to prevent the naira from surpassing the N1,700 threshold. Data from the Financial Markets Dealers Quotations (FMDQ) platform indicated that the naira’s value surged by 7.05% in the Nigerian Autonomous Foreign Exchange Market (NAFEM) following the CBN’s intervention, where approximately $20 million was deployed to support the local currency.
The CBN’s actions included selling around $20 million at rates between N1,530 and N1,540 to authorized dealer banks, with the goal of enhancing FX liquidity within the official market. The NAFEM rate fluctuated between N1,499 and N1,668, closing at N1,546.5 in the spot market the previous week. Analysts from Coronation Research observed a week-on-week appreciation of 2.9% or N46.9 for the naira. However, in the parallel market, the naira averaged N1,664 per US dollar, creating an 8% disparity between the NAFEM and parallel market rates, raising concerns about potential speculative trading.
According to FMDQ data, total turnover in the NAFEM increased by 4%, reaching $1.2 billion by Friday. Analysts reported an influx of $543.1 million into the official window, with the CBN accounting for 6.4% of this total through its FX auction sales to banks. Foreign portfolio investors (FPIs) contributed 12.3%, while non-bank corporate businesses provided 41.2% of the supply, supplemented by a 34.8% increase from exporters.
In the broader global commodities market, oil prices have declined, largely driven by anticipation surrounding the Federal Reserve’s forthcoming interest rate decision. As of the latest updates, Brent crude oil prices fell by 0.77% to $73.13, while the US benchmark West Texas Intermediate (WTI) dropped by 1.00% to $70.48. In contrast, gold prices have risen, attributed to a weaker dollar and investor caution ahead of the Fed’s expected monetary easing, with gold currently trading around $2,597.70 per ounce.
Overall, the CBN’s decisive actions are proving effective in stabilizing the naira within the official market, although the persistent gap between the official and parallel rates continues to present challenges.