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The price of Naira rose by N137.69 against the United States dollar within a week, following the launch of the Central Bank of Nigeria's new forex platform.
Data obtained from the CBN website on Sunday showed that the closing exchange rate, which stood at N1672.69 per dollar on Friday, November 29, 2024, increased to N1,535/$ at the end of the week on Friday, December 6, 2024 . , representing a gain of 8.24 percent.
This came as some members of the organized private sector urged the CBN to retain the naira gain, stressing that it would benefit the Nigerian economy.
The currency's improvement is attributed to the operation of new FX platforms as well as higher liquidity and stability in the foreign exchange market.
The CBN's platform has facilitated more transparent trading, helping to bridge the gap between the official and parallel markets, thereby stabilizing the Naira.
Throughout the week, the exchange rate of the Naira witnessed a steady rise with daily fluctuations.
At the beginning 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 rate recorded at N1,650/$.
As of Tuesday, December 3, the closing rate was up 2.11 per cent at N1,625/$, the highest rate was N1,664/$ and the lowest rate was N1623/$.
The Naira continued to strengthen against the dollar on Wednesday, December 4, gaining 1.05 per cent to close at N1,608/$, with the highest rate at N1,630/$ and the lowest rate at N1,590/$.
On Thursday, December 5, the exchange rate increased by 2.55 per cent to N1,567/$, with the highest rate being N1,610/$ and the lowest rate being N1,565/$.
The Naira ended the week 2.04 percent higher at N1,535/$ in the official market, with the highest rate at N1,575/$ and the lowest rate at N1,510/$.
The reform follows the CBN 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 increase transparency and operational efficiency in Nigeria's FX market.
CBN reported that the Bloomberg Bmatch platform features an automated trade-matching system to improve market integrity and facilitate better price discovery, ensuring that trading is more transparent and easier to monitor.
Director of the Financial Markets Department of the CBN, Omolara Duke, said in a circular to banks that the initiative represents a significant advancement in ensuring uniformity and seamless operations among market participants.
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 promote greater transparency and efficiency in the FX market.
Also, Nigeria returned to the international bond market last Monday, raising $2.02 billion through Eurobonds sold in two tranches.
The offering was oversubscribed by $9.01 billion, significantly increasing liquidity for the local currency.
The federal government issued $1.05 billion in 10-year bonds at a 10.375 percent coupon rate and $700 million in 6.5-year Eurobonds maturing in 2031 at a 9.625 percent coupon rate.
This Eurobond is expected to boost dollar liquidity in the country, complemented by the launch of the new FX platform.
At N1,535/$, the Naira recorded one of its best performances in recent months, adding to the momentum built up since the EFEMS launch.
As the official market experienced rapid increases in exchange rates, the parallel market, where foreign currencies are sold unofficially, presented an even more troubling scenario for speculators.
By the end of the week, the exchange rate was trading at N1,570/$ on 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 on the parallel market, reaching N1,530/$ on Saturday morning before stabilizing at N1,580/$ on Sunday.
OPS reacts
Chief Executive Officer and Economist, Center for the Promotion of Private Enterprise, Dr Muda Yusuf, welcomed the appreciation of the Naira while speaking with The Punch on Sunday. However, he highlighted some efforts that can be made to maintain the growth.
He said, “The recent improvement in the value of the Naira, I am talking about the Naira exchange rate, is a welcome development. This is a development that gladdens the hearts of individuals and corporations as the exchange rate issue has been one of the biggest challenges facing the economy. This has been one of the biggest drivers of inflation, the biggest driver of the higher cost of doing business, so it's a huge relief that we're having this growth. Our prayer and hope is that this continues in future also.
“You can link it to many issues. First of all, we have seen an improvement in our reserves which reached the $40 billion mark a few weeks ago, and this means that the CBN has more power to intervene in the market, and in fact, the CBN is able to stabilize the market. Is interfering for. currency.
“I would like to see that over the last five months, we have seen relative stability in the Naira exchange rate, which is a welcome development. Now, we are starting to see strength in the currency, so the level of our reserves has contributed to this Because it increases the confidence of foreign investors. Then as a result of reforms in the foreign exchange market in the last few months, we are seeing a steady improvement in autonomous foreign exchange flows into the country, especially from international money transfer operators.
Yusuf said Nigeria's recent Eurobond offering has also been a boon to the country as it has boosted investor confidence.
“As you can see, it is a combination of factors but it is important to maintain it. An important factor in stability is our fiscal environment. The level of government spending, the level of fiscal deficit and the level of debt accumulation are variables on the fiscal side that may create problems or hinder progress in currency appreciation.
“There is an appeal to the financial authorities to ensure that this growth, this positive outlook for the exchange rate, is sustained by complementing the monetary side. Our fiscal operations should be such that they do not create liquidity challenges in the economy that put new pressure on you. We need to control deficit levels, debt levels and government expenditure. I think these fiscal measures are necessary to accomplish what is being achieved.
The Director-General of the Nigeria Employers Consultative Association, Adeyemi Oyerinde, in his comments called for the sustenance of the strong Naira.
“The recent appreciation in the Naira exchange rate, especially in the last week, stood at N1533.76/$ as on Friday, December 6, 2024, which indicated that the appreciation of over eight percent is a welcome development. This has been particularly welcomed by the private sector which is facing acute foreign exchange challenges for importing raw materials and machines that are not currently produced in the country.
“While we have recognized and appreciated the recent improvements, it is difficult to definitively pinpoint the reasons for the improvement other than the recent $2.2 billion Eurobond loan obtained by the federal government or the increase in migrant remittances as a result of the festive season.
“However, to maintain and improve the appreciation in Naira value, which is what the private sector desires, we call on the Federal Government to strengthen existing measures to increase crude oil production for export, prudential and better monetary and exchange Urge to strengthen rate management, productive allocation of available foreign exchange, encourage non-oil exports and domestic refining of crude oil by private individuals and, of course, eliminate imports of refined fuel. port harcourt Refinery, and to improve government protection on goods and services manufactured in Nigeria. To reduce the movement of dollars out of the country.”
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