The Nigerian naira experienced further gains against the United States dollar on Wednesday, marking an upward trend in both the official foreign exchange and parallel markets, bringing relief to many Nigerians.
According to data from the FMDQ Securities Exchange, at the Nigerian Autonomous Foreign Exchange Market, the naira appreciated by N16 or 1.26 per cent, with the dollar quoted at N1,262.85/$ on Wednesday, strengthening from the previous day’s close of N1,278.58. This indicates a sustained positive momentum for the local currency, with expectations pointing towards potential further appreciation.
The surge in the value of the naira was credited to several foreign exchange policies implemented by the Central Bank of Nigeria (CBN), aimed at bolstering dollar supply and fostering transparency in the FX market. Notable among these policies was the abolition of market segmentation on June 14, 2023, consolidating all segments into the Investors & Exporters window (now known as the Nigerian Autonomous Foreign Exchange) and the reintroduction of the Willing Buyer, Willing Seller framework.
In January 2024, the CBN directed International Money Transfer Operators to quote exchange rates for naira payout based on prevailing market prices. Subsequent reforms in February included the removal of caps on interbank Forex transaction spreads and restrictions on the sale of interbank proceeds. Additionally, in the same month, the CBN mandated the utilization of electronic channels only for the payout of Personal Travel Allowance and Business Travel Allowance.
By March 2024, the volatility of the naira had significantly decreased following these reforms, enhancing transparency and increasing inflows into the FX market.
Currency traders attributed the naira’s appreciation to diminishing demand for the dollar and the CBN’s decision to provide foreign exchange directly to operators. Ibrahim Yahu, a BDC operator at Wuse Zone 4, highlighted the impact of the CBN’s revised rates, stating that the reduced demand for dollars coupled with direct sales from the apex bank had facilitated trading activities.
The intra-day high on Wednesday was quoted at N1,296.00, down from N1,312/$1 recorded the previous day, while the intra-day low settled at 1,210.00, marking an improvement from N1,250/$1. Notably, the exchange rate disparity between the intra-day high, intra-day low, and the closing rate remained minimal, all falling below N130.
The average daily turnover also saw an increase, rising to $116 million from $111.8 million, reflecting heightened market activity and confidence in the ongoing reforms driving the appreciation of the naira against the dollar.
