The naira surged N1,1173.88/$1 on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window on Tuesday, marking an increase of 14.09% from the previous day’s rate.
This is the highest one-day increase since January 2024, and it comes amidst a significant surge in foreign exchange (FX) turnover, which increased by 81.59% to $328.32 million.
According to data from the FMDQ, the naira held steady on Monday, May 27, 2024, at the rate of N1,339.33/$1.
However, the foreign exchange turnover on Monday was significantly lower at $180.8 million, reflecting a 67.50% decrease compared to the previous trading session at the end of the previous week.
On Tuesday, May 28, 2024, the foreign exchange market experienced a remarkable recovery with turnover climbing to $328.32 million. This sharp increase in value and turnover indicates a renewed activity and demand in the FX market, likely driven by the interventions and policies to stabilise the naira.
The improved exchange rate suggests that the Central Bank of Nigeria’s (CBN) efforts to maintain currency stability are taking effect, despite fluctuations in market liquidity.
Analysts have noted that maintaining the naira at this rate amid varying turnover levels points to a controlled foreign exchange environment, which is critical for investor confidence and economic planning.
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The increase in FX turnover may be due to a combination of factors, including end-of-month financial settlements, increased inflows from foreign investments, and strategic measures by the central bank to ensure sufficient liquidity in the market.
Also, the appreciation on the official market accompanied auctions of treasury and OMO bills.
The increase in naira value and FX turnover as well as the successful auctions of government securities are pivotal in the CBN’s broader strategy to maintain price stability and support economic growth.
By mopping up excess liquidity, the CBN aims to curb inflation, which has been a major concern for policymakers. The amount raised from the auctions is expected to help mitigate inflationary pressures by reducing the amount of money in circulation, thereby supporting the naira.