The naira appreciated on the official foreign exchange window by N103.35 in a single day to close at N1,546.41/$1.
In contrast, the currency remained stable in the parallel market, holding steady at N1,650/$1.
Precisely, on the Nigerian Autonomous Foreign Exchange Market (NAFEX) window, the naira closed on Friday at N1,546.41/$1, marking a significant gain of N103.35 or 6.68 per cent compared to the previous day’s rate of N1,649.76/$1.
However, the parallel market remained stable, with the naira maintaining its value at N1,650/$1, unchanged from the previous day.
The currency had faced significant volatility earlier in the week. On Thursday, the naira hit a record low after domestic dollar liquidity plummeted by nearly 50 percent. The naira had fallen by 5.8 per cent to N1,649.76 per dollar, the steepest daily drop since May 30, according to Bloomberg data.
This decline marked a reversal from Wednesday’s 4.8 per cent gain following the government’s successful $900 million domestic dollar bond issuance.
Bloomberg noted that analysts had attributed the recent turbulence to a severe shortage of US dollars, with domestic dollar liquidity falling to $114 million.
Head of Africa Strategy at Standard Chartered Bank, Samir Gadio, noted that while the central bank has resumed dollar sales to local bureau de change traders, more targeted and substantial interventions may be necessary to stabilise the naira amidst ongoing foreign-exchange flow imbalances.
“There is still naira pressure given the foreign-exchange flow imbalances,” said Samir Gadio, head of Africa strategy at Standard Chartered Bank.
While the central bank resumed selling dollars to local bureau de change traders this week, “larger and more targeted supply may be needed to stabilise the naira in the absence of portfolio inflows,” he said.
Seasonal factors are also influencing the market, with increased demand for foreign currency among Nigerians travelling abroad or paying for international school fees. Additionally, a decrease in treasury bill yields, which fell to 18.59 per cent on September 11, the lowest since January has impacted market sentiment.
Economist, Omobola Adu of BancTrust & Co. Investment Bank, pointed out that the recent slowdown in inflation could lead the central bank to pause rate cuts at its upcoming policy meeting, influencing investor behaviour.
Adu anticipates that the naira could strengthen to around N1,500 per dollar by year-end, contingent on effective central bank intervention and the government’s commitment to economic reforms.
“The government must enhance policy credibility and adhere to its promises to reassure investors,” Adu emphasised.
Nume Ekeghe
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