The Nigerian naira showcased a remarkable rebound against the United States dollar on Wednesday, both in the official and parallel markets.
The surge in the local currency’s value came alongside the Central Bank of Nigeria’s announcement of the successful settlement of all valid foreign exchange backlogs, a significant achievement in line with the apex bank’s commitment to resolving currency-related issues.
According to data compiled from the FMDQ Securities Exchange, the naira closed trading at 1,410/dollar at the parallel market and N1,492 at the official Nigerian Autonomous Foreign Exchange Market (NAFEM).
This marks a considerable gain for the naira, representing an appreciation of N68 or 4.5% at NAFEM and a whopping 13.5% or N190 at the parallel market, compared to the previous day’s rates.
The surge in the naira’s value can be attributed to several factors, including a renewed confidence in the market as speculators begin offloading their dollar stocks.
The recent clampdowns on illegal Bureau De Change (BDC) operators by the Economic and Financial Crimes Commission (EFCC) have also contributed to reducing volatility in the foreign exchange market.
In response to the improved liquidity and stability in the market, currency traders across various regions have witnessed a decline in demand for the US dollar.
Ibrahim Yahu, a Bureau De Change Operator in Abuja, noted that the greenback was bought at N1400/$1 and sold at N1500/$, allowing operators to make a spread of N100/$1.
Similarly, traders in Lagos have reported a decrease in demand for the dollar, with most transactions occurring at rates between N1350 and N1450.
Mustafa Ibrahim, a currency trader in Ikeja, highlighted the impact of the CBN’s recent measures, stating that the local currency may reach a new high of N1,200/dollar in the coming weeks if the current trend continues.
The recent clearance of the $7 billion foreign exchange backlog by the Central Bank of Nigeria has been instrumental in restoring confidence and stability in the market. The meticulous assessment of transactions by independent auditors from Deloitte Consulting ensured that only legitimate claims were honored, further bolstering market credibility.
The improved liquidity in the foreign exchange market aligns with the Central Bank’s broader strategy to stabilize the exchange rate, curb imported inflation, and stimulate economic growth.
With Nigeria’s external reserves experiencing sustained growth and a significant increase in Diaspora remittances, the outlook for the naira remains positive.
As the nation continues its efforts to strengthen the economy and restore market confidence, the successful clearance of the foreign exchange backlog represents a pivotal milestone in Nigeria’s financial landscape.
Investors and businesses alike can look forward to a more resilient and stable economic environment in the months ahead.