The Nigerian naira staged a comeback to appreciate massively against the dollar on Friday, 24th November 2023, closing at a new high of N794.89/$1 at the official market.
The naira’s gain has come as a respite to many analysts, who had expected the Central Bank of Nigeria’s (CBN) recent move to clear some of its FX backlog to boost confidence in the currency.
The domestic currency appreciated 20.31 per cent to close at N794.89 to a dollar at the close of business on Friday, data from the NAFEM where forex is officially traded, showed.
This represents an N161.44 gain or a 20.31% increase in the local currency compared to the N956.33 it closed on Thursday.
The intraday high recorded was N1136/$1, while the intraday low was N700.00/$1, representing a wide spread of N436/$1.
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According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $75.82 million, representing a 28.13% decline compared to the previous day.
Similarly, the naira strengthened at the parallel forex market where forex is sold unofficially, the exchange rate appreciated by 0.87%, quoted at N1155/$1, while peer-to-peer traders quoted around N1151.22/$1.
The former President and Chairman governing council of, the Chartered Institute of Stockbrokers (CIS) and the Managing Director, of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe in an exclusive chat with Nairametrics said for the exchange rate to be stable, market and participants confidence is key.
“Confidence is what makes foreigners want to come to invest in your country and make locals want to keep their investments here.
In the absence of these dynamics, demand will naturally outstrip supply and you see the sort of instability we are experiencing now.
I think the decision to clear FX commitment backs will be positive for market confidence, but the desired impact might manifest in the medium term rather than in the short run.
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I also think the efforts at using monetary policy tools to reduce system liquidity could ultimately reduce currency speculation but again it’s not a silver bullet.
Deliberate efforts need to intensify at effecting structural changes that will encourage import substitution such as improved security, better infrastructure, increased foreign direct investments, and encouraging local production,” he said.
Managing Director/CEO, of Financial Derivatives Company Limited, Bismarck Rewane had said in a report that the naira is expected to remain volatile on lingering forex supply concerns.
The dollar dearth means speculative buying is likely to continue, with an increasing number of market participants taking long positions on the dollar while shorting the naira