Naira Gains by Over 8% in One Week
The naira appreciated by N137.69 against the United States dollar within a week, following the introduction of the Central Bank of Nigeria’s new foreign exchange platform.
Data obtained from the CBN’s website on Sunday showed that the closing exchange rate, which was N1672.69 per dollar on Friday, November 29, 2024, rose to N1,535/$ at the end of the week on Friday, December 6, 2024, representing an 8.24 per cent gain.
This came as some members of the Organised Private Sector urged the CBN to sustain the naira gain, stressing that this would benefit the Nigerian economy.
The currency’s improvement is attributed to the operationalisation of the new FX platform, as well as higher liquidity and stability in the foreign exchange market.
The CBN’s platform has facilitated more transparent trading, which has helped bridge the gap between the official and parallel markets, thereby stabilising the naira.
Throughout the week, the naira saw a steady boost in its exchange rate, with fluctuations each day.
At the start of the week on Monday, December 2, the exchange rate rose by 0.76 per cent to N1,660/$, with the highest rate recorded at N1,678/$ and the lowest at N1,650/$.
By Tuesday, December 3, the closing rate was N1,625/$, rising by 2.11 per cent, with the highest rate at N1,664/$ and the lowest at N1623/$.
The naira continued to strengthen against the dollar on Wednesday, December 4, rising by 1.05 per cent and closing at N1,608/$, with the highest rate at N1,630/$ and the lowest at N1,590/$.
On Thursday, December 5, the exchange rate rose further by 2.55 per cent to N1,567/$, with the highest rate at N1,610/$ and the lowest at N1,565/$.
The naira ended the week rising by 2.04 per cent at N1,535/$, with the highest rate at N1,575/$ and the lowest at N1,510/$on the official market.
The improvement follows the CBN’s directive issued on Tuesday, November 26, 2024, which required all banks operating in the interbank FX market to adopt the Bloomberg BMatch system for trading.
The platform, which became operational on December 2, 2024, aims to enhance transparency and operational efficiency in Nigeria’s FX market.
The CBN explained that the Bloomberg BMatch platform introduces an automated trade-matching system to improve market integrity and facilitate better price discovery, ensuring that trades are more transparent and easier to monitor.
The Director of the CBN’s Financial Markets Department, Omolara Duke, noted in a circular to banks that the initiative represents a significant advancement in ensuring uniformity and seamless operations among market participants.
In a bid to further streamline operations, the CBN also issued detailed guidelines for the interbank FX trading system under the Electronic Foreign Exchange Matching System.
The guidelines set a minimum tradable amount of $100,000, with incremental clip sizes of $50,000, to foster greater transparency and efficiency in the FX market.
Also, Nigeria returned to the international bond market last Monday, raising $2.02bn through Eurobonds sold in two tranches.
The offering was oversubscribed by $9.01bn, significantly boosting liquidity for the local currency.
The Federal Government issued $1.05bn in 10-year bonds at a 10.375 per cent coupon rate and $700m in 6.5-year Eurobonds maturing in 2031 at a 9.625 per cent coupon rate.
This Eurobond is expected to boost dollar liquidity in the country, supplementing the introduction of the new FX platform.
At N1,535/$, the naira recorded one of its best performances in recent months, adding to the momentum built since EFEMS was launched.
As the official market experienced rapid gains in the exchange rate, the parallel market, where forex is sold unofficially, presented an even more unsettling scenario for speculators.
By the end of the week, the exchange rate was trading at N1,570/$ at the parallel market, a sharp decline from N1,700/$ earlier in the week, as the naira continued its strong recovery against the dollar.
Over the weekend, the naira rose sharply in the parallel market, peaking at N1,530/$ on Saturday morning before settling at N1,580/$ on Sunday.
