The Nigerian naira made a significant recovery in the official market on September 6, 2024, closing at N1,593.32/$1.
This 2.89% rebound comes after three consecutive days of depreciation, marking a momentary relief for the local currency market following a week marked by substantial volatility. According to data from the FMDQ, this recovery saw the naira regain some stability as it bounced back below the N1,600/$1 threshold.
The naira’s recovery on September 6 was notable, particularly after a challenging start to the week. The currency began its downward trend on September 3, 2024, when it depreciated by 1.59% to close at N1,611.34/$1.
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The decline continued over the next two days, with the naira weakening by 0.89% on September 4 and a further 0.83% on September 5, closing at N1,625.88/$1 and N1,639.41/$1, respectively. The closing rate on September 4 was a six-month low, while the rate on September 5 was a seven-month low, highlighting the naira’s struggles in the face of market pressures.
On September 6, however, the naira rebounded strongly, trading between a high of N1,665/$1 and a low of N1,580/$1, reflecting significant volatility. This recovery was accompanied by a surge in foreign exchange (forex) turnover, which jumped by 31.96% to $245.17 million from $185.79 million on September 5.
This increased dollar supply in the Nigerian Autonomous Foreign Exchange Market (NAFEM) was a critical factor in the naira’s recovery, with traders citing improved liquidity as a key driver.
The naira’s rebound on September 6 also coincided with the settlement of Nigeria’s $500 million domestic dollar bond, a crucial event that appears to have bolstered market sentiment.
The Federal Government of Nigeria had issued this bond for subscription on August 19, 2024, offering a 9.75% per annum interest rate. Structured as a five-year investment, the bond attracted significant interest, with investors able to purchase units starting from $1,000, with an initial minimum subscription set at $10,000.
In addition to the bond settlement, the Central Bank of Nigeria (CBN) took steps to further support the naira by approving the sale of $20,000 to each Bureau De Change (BDC) operator at the rate of N1,580/$ on September 6.
This move was part of the CBN’s efforts to provide more forex liquidity in the market and meet the growing demand for dollars. The CBN stipulated that BDCs are to sell to eligible end users at a margin not exceeding 1% of the purchase rate, ensuring that the dollars are distributed efficiently and at a controlled rate.
The renewed surge in turnover to $245.17 million on September 6 suggests that a boost in dollar inflows may have played a role in the naira’s recovery. However, with turnover fluctuating between $71 million and over $245 million within the span of five days, the market remains unpredictable.