Nigeria’s naira strengthened on Thursday at the official foreign exchange market, reaching a two-month high of N1,382.35 per dollar. This increase was facilitated by foreign exchange reforms implemented by the Central Bank of Nigeria (CBN), which have increased investor confidence and dollar supply.
Based on data obtained from the FMDQ Securities Exchange, the last time the naira finished as strong as it did on Thursday was on January 29, 2024, when the dollar was quoted at N1,348.63 at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
The naira appreciated 7.98 percent after trade on Thursday compared to the N1,492.61 quoted at the NAFEM on Wednesday.
However, the local currency lost 1.98 percent of its value at the parallel market, where the dollar ended the day at N1,510 as opposed to N1,480 on Wednesday.
In order to increase short-, medium-, and long-term liquidity in the foreign exchange markets, the Central Bank has implemented a number of policy changes.
The introduction of the Price Verification System (PVS), limits on banks’ Net Open Position, lifting the daily cap of N2 billion on remunerable Standing Deposit Facility (SDF), liberalization of the FX market, clearing of FX backlog obligations to banks and airlines, and reform of the BDC segment are a few of the reforms.
In order to restore stability, improve transparency, increase supply, and encourage price discovery in the Nigeria Autonomous Foreign Exchange Market, other measures include promoting a willing buyer-willing seller market, eliminating all margin restrictions for remittances through the International Money Transfer Operator (IMTO), introducing a two-way quote system, and implementing extensive reforms in the Bureau De Change (BDC) segment of the market.
The Monetary Policy Committee (MPC) meeting, which took place on February 26 and 27, 2024, also raised the MPR by 400 basis points to 22.75 from 18.75 percent; modified the asymmetric corridor around the MPR to +100/-700 from +100/-300 basis points; increased the Cash Reserve Ratio from 32.5 percent to 45.0 percent; and maintained the Liquidity Ratio at 30 percent in an effort to control inflation and stabilize the naira.
The CBN’s deputy governor in charge of economic policy, Muhammad Sani Abdullahi, stated that following the MPC on February 27, 2024, foreign exchange rates increased by 0.33 percent, closing at N/US$1,625.23 on March 8, 2024, as opposed to N/US$1,630.66 on February 27, 2024.
He stated that following interventions, exchange rate volatility decreased and the spread shrank to N/US$222.24 from N/US$662.59; FX rates also declined by 10.32 percent on March 8, 2024, closing at N/US$1,625.23, as opposed to N/US$1,473.26 on February 13, 2024.
In a speech given on March 20, 2024, in London at the CITI-CEEMA Macro conference, he predicted that external reserves would rise slightly from US$34.98 billion on March 14, 2024, to US$35,014.28 million by the end of March 2024.
