The naira has made significant gains against the US dollar, appreciating by 8.24% within a week. This improvement is attributed to the introduction of the Central Bank of Nigeria’s (CBN) new foreign exchange platform, which has facilitated more transparent trading and bridged the gap between the official and parallel markets.
According to data obtained from the CBN’s website, the closing exchange rate rose from N1,672.69 per dollar on Friday, November 29, 2024, to N1,535 per dollar on Friday, December 6, 2024. This represents a gain of N137.69 against the US dollar.
The naira’s improvement is also attributed to higher liquidity and stability in the foreign exchange market. The CBN’s platform has introduced an automated trade-matching system, which has improved market integrity and facilitated better price discovery.
Throughout the week, the naira saw steady boosts in its exchange rate, with fluctuations each day. Here’s a breakdown of the daily exchange rates:
- Monday, December 2: N1,660 per dollar (0.76% increase)
- Tuesday, December 3: N1,625 per dollar (2.11% increase)
- Wednesday, December 4: N1,608 per dollar (1.05% increase)
- Thursday, December 5: N1,567 per dollar (2.55% increase)
- Friday, December 6: N1,535 per dollar (2.04% increase)
The recent appreciation of the naira has been welcomed by experts, who attribute the improvement to a combination of factors, including the introduction of the new FX platform, higher liquidity, and stability in the foreign exchange market.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, noted that the recent improvement in the value of the naira is a welcome development, but emphasized the need to sustain the gain through fiscal discipline and monetary policy management.
“The recent improvement in the value of the naira, I’m talking about the naira exchange rate, is a welcome development. It is a development that gladdens the hearts of individuals and corporations because the exchange rate issue has been one of the biggest challenges facing the economy,” Yusuf said.
“It has been one of the biggest drivers of inflation, the biggest driver of the high cost of doing business, so it is a great relief that we are having this development. Our prayer and hope is that this should be sustained going forward.”
Yusuf pointed out that the recent Eurobond offering of Nigeria has also handed the country a boon as it increased investors’ confidence.
Adeyemi Oyerinde, Director-General of the Nigeria Employers’ Consultative Association, also called for a sustenance of the stronger naira, urging the Federal Government to strengthen existing measures to upscale crude oil production for export and promote non-oil export.
“While we recognised and appreciate the recent improvements, it is, however, difficult to definitively pinpoint the reasons for the improvement except the recent $2.2bn Eurobond loan secured by the Federal Government or the upsurge in diaspora remittances as a result of the festive season,” Oyerinde said.
“However, to sustain and improve the appreciation in the naira value, which is what the private sector desires, we urge the Federal Government to strengthen existing measures to upscale crude oil production for export, entrench a better monetary and exchange rate management through judicious and productive allocation of available forex, promote non-oil export and further encourage domestic refining of crude oil by private individuals and, of course, the Port Harcourt refinery to end importation of refined fuels, and improve government patronage on made in Nigeria goods and services to lower dollar movement outside the country.”
The CBN’s new foreign exchange platform, which was introduced to enhance transparency and operational efficiency in Nigeria’s FX market, has been instrumental in facilitating the naira’s appreciation.
The platform, which became operational on December 2, 2024, aims to provide a more transparent and efficient way of trading foreign exchange in Nigeria.
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The CBN explained that the Bloomberg BMatch platform introduces an automated trade-matching system to improve market integrity and facilitate better price discovery, ensuring that trades are more transparent and easier to monitor.
The Director of the CBN’s Financial Markets Department, Omolara Duke, noted in a circular to banks that the initiative represents a significant advancement in ensuring uniformity and seamless operations among market participants.
Nigeria returned to the international bond market last Monday, raising $2.02bn through Eurobonds sold in two tranches. The offering was oversubscribed by $9.01bn, significantly boosting liquidity for the local currency. The Federal Government issued $1.05bn in 10-year bonds at a 10.375 percent coupon rate and $700m in 6.5-year Eurobonds maturing in 2031 at a 9.625 percent coupon rate. This Eurobond is expected to boost dollar liquidity in the country, supplementing the introduction of the new FX platform.
At N1,535/$, the naira recorded one of its best performances in recent months, adding to the momentum built since EFEMS was launched.
As the official market experienced rapid gains in the exchange rate, the parallel market, where forex is sold unofficially, presented an even more unsettling scenario for speculators.
By the end of the week, the exchange rate was trading at N1,570/$ at the parallel market, a sharp decline from N1,700/$ earlier in the week, as the naira continued its strong recovery against the dollar.
Over the weekend, the naira rose sharply in the parallel market, peaking at N1,530/$ on Saturday morning before settling at N1,580/$ on Sunday.
The recent appreciation of the naira has been welcomed by experts, who attribute the improvement to a combination of factors, including the introduction of the new FX platform, higher liquidity, and stability in the foreign exchange market.
Dr. Muda Yusuf, Chief Executive Officer of the Centre for the Promotion of Private Enterprise, noted that the recent improvement in the value of the naira is a welcome development, but emphasized the need to sustain the gain through fiscal discipline and monetary policy management.
Adeyemi Oyerinde, Director-General of the Nigeria Employers’ Consultative Association, also called for a sustenance of the stronger naira, urging the Federal Government to strengthen existing measures to upscale crude oil production for export and promote non-oil export.
Overall, the naira’s recent appreciation against the US dollar is a positive development for the Nigerian economy, and experts are urging the government to sustain the gain through prudent fiscal and monetary policy management.
