Nigeria’s currency, the naira, gained 0.58 percent against the US dollar on Monday at the official foreign exchange (FX) as the supply of the US dollar decreased.
The dollar was quoted at N1,617,96 after trading on Monday, higher than N1,627.40 on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from FMDQ Securities. This led to an increase in the value of the naira.
As anticipated by analysts, this was linked to higher naira demand following the Central Bank of Nigeria’s 400 basis point increase in the Monetary Policy Rate, which brought it from 18.75 percent to 22.75 percent.
The MPR was raised by 400 basis points to 22.75 from 18.75 percent during the Monetary Policy Committee (MPC) meeting last Monday and Tuesday. The asymmetric corridor around the MPR was also adjusted to +100/-700 from +100/-300 basis points. The Cash Reserve Ratio was also raised from 32.5 percent to 45.0 percent, and the Liquidity Ratio was kept at 30 percent.
The intraday high reached N1,650 per dollar on Monday during FX market trade, which was less than the N1,640/$1 price from Friday. In addition, the intraday low dropped to N1,511 per dollar from N1,413/1 on Friday at NAFEM.
From $296.35 million on Friday to $96.13 million on Monday, there was a 67.56 percent decline in the dollar supply by interested buyers and sellers.
The naira was trading between N1,610 and N1,620 on Monday at the parallel market, sometimes known as the “black market,” compared to N1,620 on Friday.
With the official rate at N1,617 and the average black market rate at N1,618; the difference between the two market rates has shrunk to only N1.
Following inflows of foreign cash and remittances, Nigeria’s external reserves, which provide the Central Bank of Nigeria (CBN) with the ability to defend the naira, have increased by 2.83 percent year to date.
Foreign exchange reserves rose from $33.17 billion at the start of the year to $34.11 billion as of March 7, 2024, according to data from the Central Bank of Nigeria (CBN).
The foreign cash and other assets that a nation’s central bank holds are referred to as external reserves. Usually, gold, other international assets, and foreign currencies make up these reserves.
