Naira Surges: Exchange Rate Rebounds to ₦1,660/$1 in Parallel Market

Naira Surges: Exchange Rate Rebounds to ₦1,660/$1 in Parallel Market
Dollar and Naira

Due to significant swings in the official and parallel markets’ exchange rates to the dollar, the naira had a tumultuous trading week.

 According to the Central Bank of Nigeria’s (CBN) currency tracker, the official exchange rate closed at N1,540/$1 by the week ending December 13, 2024, indicating a minor decline of 0.35% from N1,535/$1 reported a week earlier.

According to market sources cited by The News Chronicles, the naira recovered from intraweek volatility lows of N1,750/$1 to close the week trading at an average of about N1,660/$1.

While some traders provided lower quotes, others provided higher quotes.

Late weakness offsets midweek advances

According to the CBN data, the naira gained value early in the week, reaching N1,525/$1, and after beginning the week, it was higher at N1,535/$1.

  • This impetus, however, was short-lived as the currency fell precipitously to N1,545/$1 in the middle of the week before bouncing back somewhat to conclude at N1,540/$1.
  • Additionally noteworthy was the intra-day volatility, with trading highs of N1,560/$1 and lows of N1,500/$1.
  • The Simple Average closing rate was N1,534/$1, indicating continued pressure on the local currency despite modest indications of recovery, while the Volume Weighted Average rate for the week was N1,533.2/$1.

Even more, fluctuations occurred over the week in the parallel market, which is frequently regarded as a gauge of the actual demand for the currency.

  • According to TNC’s sources, the naira plummeted to a record low of N1,750/$1 on the black market before recovering to N1,660/$1 late in the week.
  • Other websites that Nairametrics examined also had quotes of about N1,680/$1.
  • Increased dollar inflows from exporters and remittances, together with market interventions by major participants, have been credited with the rebound.
  • Market participants have expressed concern about the significant discrepancy between the official and parallel rates, pointing out that speculative activity still accounts for a large portion of the parallel market’s volatility.

Market watchers have little idea of the size of dollar supply in the official market because the CBN has not yet released official trade turnover numbers for the week, despite the fluctuations in currency rates.

Analysts predict that dollar liquidity will continue to be limited as people and companies rush to get foreign currency in the face of strong demand.

The lack of turnover data raises concerns about the central bank’s capacity to preserve stability and increases market turbulence.

What To Note

Speaking to THE NEWS CHRONICLES earlier this week, a few BDC operators expressed their belief that the weakness was probably the result of speculators who are still holding firm even after the CBN launched a more reliable trading platform.

  • Aminu Gwadebe, the president of the Association of Bureau De Change Operators of Nigeria (ABCON), had previously warned that forex traders would fight the naira’s sharp increase in value in order to recover their losses, according to a TNC report.
  • In areas where volatility is common, Gwadebe had encouraged the CBN to maintain the momentum, deter unlawful currency substitution and speculation, and interact with BDC operators.

Following days of appreciation since the apex bank launched the EFEMS platform, Gwadebe’s remarks came after the naira significantly strengthened on both the official and parallel markets.

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