Naira soars: CBN bolsters dollar supply, boosts economy

In the past two weeks, the Central Bank of Nigeria and other banking institutions have bolstered dollar supply to the foreign exchange market by $2.5 billion, resulting in the strengthening of the naira to N1,309 against the United States dollar.

Official data from the FMDQ Securities Exchange indicates that the naira closed at N1,309 per dollar on Thursday, compared to N1,300 per dollar the previous day. Despite this improvement, it remains at an eight-week low for the naira, which continues to appreciate against the US dollar. Trading activities were halted on Friday due to the public holiday.

Similarly, forex transactions between willing sellers and buyers at the Nigerian Autonomous Foreign Exchange Market rose by 106% to $857 million at the close of trading on Thursday, the highest level since the Central Bank implemented its new forex policies.

This latest development is also the largest turnover since 2021, with the previous record being $760 million on June 2nd, 2022.

The average daily forex turnover in March was approximately $220 million, compared to $177 million this year.

The CBN made $1 billion in sales in its penultimate week.

The intraday high closed at N1392 on Thursday, down from N1,460 per dollar on Wednesday, according to the summary of FX trading. Compared to the closing N1,200 on Wednesday, the intraday low increased to N1,250 on Thursday. Many of the CBN’s current policies have been credited with increasing liquidity in the forex market.

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Unification of exchange rate windows, liberalization of the foreign exchange market, clearing bank and airline FX backlogs, establishment of a Price Verification System, limitations on banks’ Net Open Position, elimination of the daily N2 billion cap on remunerable Standing Deposit Facility, and reorganization of the Bureau De Change division are some of the major reforms.

Forex turnover, which shows the total value of all foreign exchange transactions completed within a given timeframe and offers insights into the liquidity and liveliness of the forex market, is a crucial metric in the financial industry.

A market with a high turnover rate is one in which many players are buying and selling currencies, which can be interpreted as a sign of stability and confidence among investors.

The apex bank began addressing suspected cases of excessive foreign exchange speculation and hoarding from Nigerian banks on the official end of the market.

Additionally, the top bank declared that the backlog of legitimate foreign exchange had been fully cleared. They declared that they had paid $1.5 billion to settle debts owed to bank clients, which essentially cleared the remaining amount in the FX backlog.

Since the US dollar is currently trading at N1,280 on the parallel market, the value of the naira has increased.

In line with recent foreign exchange policy measures implemented by the Central Bank of Nigeria, the US dollar is currently selling for between N1,280 and N1,305 on the black market, depending on who is buying and selling.

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