On Tuesday, the naira appreciated 0.90 percent versus the dollar due to a rise in supply at the official foreign exchange (FX) market.
According to data issued by the FMDQ Securities Exchange, following trading on Tuesday, the local currency gained value as the dollar was quoted at N1,603.38, greater than N1,617.96 posted on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The intraday high rose from a low of N1,650/$1 stated on the spot to N1,637 per dollar. Additionally, the intraday low increased to N1,425.35, closing on Monday at N1,511, a higher value.
The amount of dollars supplied by willing sellers and willing buyers, including banks, increased from $96.13 million on Monday to $122.18 million on Tuesday, a 27.09 percent increase.
The naira gained 0.81 percent on Tuesday at the black market, or parallel market, where the dollar was sold for an average price of N1,605. A dollar was sold by certain dealers for between N1,600 and N1,612.
The Central Bank of Nigeria raised the Monetary Policy Rate by 400 basis points to 22.75 percent from 18.75 percent, as analysts had projected, which led to a rise in demand for the naira and the strengthening of the value of the currency.
Despite a 45 percent devaluation in February, the Economist Intelligence Unit (EIU) reported that “persistently high inflation, deficit monetization, negative short-term real interest rates, low foreign reserves and a backlog of foreign-exchange orders will continue to sap confidence in the naira.”
According to the article, dealers will remain apprehensive that there is a possibility of tightening currency controls at any time.
“We anticipate that foreign borrowing will be used to recover foreign reserves and that the naira will settle until the end of 2024. Another step of depreciation is improbable. We project a rate of N1,770:US$1 by the end of 2024, accounting for additional short-term losses, as opposed to roughly N1,600:US$1 at the end of February. This prediction is well-balanced, though.”
“Numerous setbacks to self-assurance could lead to an even more severe deterioration. Alternatively, if the CBN tightens monetary policy more aggressively than we anticipate, the rate could end up stronger given that the naira is increasingly seeming undervalued in real terms,” the research added.
The EIU forecasts that the naira would conclude 2025 at N1,817:US$1, indicating a relatively stable future despite the naira’s significant real-terms adjustment. Nonetheless, we continue to believe that the naira’s long-term value will be weakened by a loose combination of fiscal and monetary policy. We predict that the currency will conclude 2028 at N2,381:US$1, with a 5-15 percent differential with the parallel market, in line with a decline in global oil prices from a cyclical peak.
