The naira strengthened to a fresh high, closing at N1,372.91 to the dollar at the official foreign exchange market on Tuesday, signifying increasing trust in a market-driven currency mechanism without any dollar sales from the Central Bank of Nigeria.
Local currency rose N17.45, appreciating 1.3 per cent from the closing value of N1,390.36 from the prior session, according to data from the Nigerian Foreign Exchange Market.
Intraday trading saw the naira trade above N1,360 before closing slightly softer. The exchange rate at the parallel market stayed constant at N1,450 per dollar, thereby reducing the distance between the two marketplaces.
Rising foreign reserves, which stood at $46.59 billion as of early February. The News Chronicle notes how improved foreign exchange supply supported the most recent appreciation and strengthens the country’s buffer against volatility.
Fixed-income investments accounted for most of the foreign portfolio inflows over time, as international investors seemed very keen on high-yielding naira assets. Bonds made up almost half of all inflows; equity and direct investment flows were comparatively little.
On the supply side, exporters, importers and non-bank businesses were instrumental in increasing liquidity as the lack of central bank action highlighted the continuing move towards a more open and market-driven FX regime.
Analysts argue that the closer range between formal and street rates mirrors better dollar demand and supply balance, therefore helping near-term currency stability.
