CBN Policies Paying Off as exchange rate (N1431/$) posts Best Gain in 6 Weeks

The exchange rate between the Naira and the Dollar strengthened to N1,431/$ on Friday, March 22, 2024, closing the week on a positive note.

Data from the FMDQOTC, where the exchange rate is officially set, revealed that the official currency gained 1.52% at the close of business, continuing a rally that has now lasted 7 days.

The Naira has now gained over 12% in one week, suggesting the central bank’s policies, implemented aggressively since February, are beginning to show success.

WHAT THE DATA IS SAYING
The exchange rate closed at N1,431/$1, the best rate since February 5th when it closed at N1419.86/$1

According to the FMDQ, the Naira recorded an intra-day high and low of N1,468/$1 and N1,301/$1 respectively, while the NAFEX rate is currently N1,381.35/$1.

Daily turnover was $199.7 million culminating in a total turnover of $1 billion this week alone suggesting that improved liquidity is now been experienced in the market.

Nigeria’s external reserve position is currently $34.3 billion and is expected to rise to $35 billion according to projections from the apex bank.

On the parallel market where the exchange rate trades unofficially, traders still quoted between N1400-N1480/$1 depending on who is buying or selling.

The UK Pounds also fell below N2000/£1 in the parallel market.
CBN Interventions paying off

The Central Bank of Nigeria’s (CBN) recent policies have played a pivotal role in the strengthening of the Naira against the dollar, a trend highlighted by the significant appreciation in its value over the past week.

Among the measures that have contributed to this positive outcome, the CBN’s strategic interventions in the foreign exchange market stand out.

Traders who spoke to Nairametrics suggest the central bank was active in the official market during the week. The CBN likely sold over $50 million according to one trader with knowledge of the matter.

By increasing the supply of dollars, the apex bank is addressing the demand-supply mismatch that is perceived to have previously led to the Naira’s depreciation.

The CBN’s rigorous enforcement of foreign exchange regulations has curtailed speculative activities, contributing to exchange rate stability.