Naira strengthens at official window, slumps in black market

The exchange rate between the naira and the dollar strengthened for the third consecutive day, closing at N1,534.9/$1 on the official market.
This represents an appreciation of N14.06 in the local currency when compared to the N1,548.25/$1 it traded the previous day on Friday, March 1, 2024.

This marks the strongest level the naira has reached in 7 days.

The official NAFEX rate, which serves as the average rate and benchmark rate used by the CBN, was quoted at N1,567.65 on March 1st, 2024.

The spread between the intraday high and low at the official window also continued to narrow as the intraday high recorded was N1,600.75/$1, while the intraday low was N1,425.35/$1, representing a lean spread of N175.40/$1.

However, the naira slumped against the dollar at the parallel market slumping to N1,610/$1 as against the N1,600 /$1 it traded the previous day representing a loss of N10 as the difference between the official and parallel windows continued its convergence.

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The naira also reversed its recent gain against the British Pound to trade at N2,050/£1 as against the previous trading day’s price of N1,900/£1. This represents a loss of N150.

The naira closed flat against the Canadian dollar to trade at N1,150/CA$1, same as the previous trading day’s rate.

The Euro also closed flat against the naira to trade at ₦1,750/€1 same as the previous closing price.

The exchange rate last traded above N1,600/$1 on February 28th, when it sold for N1,609.51/$1. Since then, it has sold for N1,595.11 and N1,548.25 on February 29th and March 1st, respectively, establishing a trend that should reassure policymakers.

The official exchange rate fell to N1,615.94/$1 as the central bank intensified its efforts to combat inflation.

The apex bank raised its benchmark monetary policy rate to 22.75%, sold over N3 trillion in Treasury Bills and OMO bills combined, and also introduced new guidelines for the operation of BDCs.

It commenced the sale of forex to BDC operators while also banning over 4,000 operators for failing to meet its licensing requirements.

While it is unclear if these actions are the reasons for the strengthening exchange rate, analysts suggest that a market equilibrium may be emerging.

Forex turnover in the last three days of trading has improved, averaging $250 million per day, up from $160 million per day a week earlier.