Naira Expected to Appreciate This More Following CBN Regulations

According to recent predictions, the naira is expected to stabilise this week, following different moderations from the Central Bank of Nigeria (CBN) that have reduced the pressure on demand following the decline in dollar supply.

Last week, the foreign exchange (FX) market closed positively as the local currency appreciated against the dollar in the official and parallel markets.

The naira gained 0.5% on Friday last week as the dollar was quoted at N1,602.75, stronger than its opening for the week at N1,617.96, quoted on Monday at the official FX market. This revelation was compiled from data from the FMDQ Securities Exchange. 

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While the naira closed at the parallel market, the local currency finished trading last week by 0.31%, settling at N1,605 on Friday as against N1,610 on Monday; this data was collated from different street traders and trading platforms.

However, the dollar supplied by FX market players declined by 20.99% to $848.14 million on Friday, compared to $1,073.50 million recorded on Monday, the week's first trading day.

Last week, the pressure on the naira/dollar exchange rate eased as Nigeria's external reserves sustained growth in one month.

Data from the Central Bank of Nigeria (CBN) showed that the foreign currency reserves increased by 3.62% to $34.37 billion as of March 12, 2024, from $33.17 recorded at the beginning of February 2024.

On a daily trading basis, the naira closed flat on Friday at 1,602.75 per dollar, representing 0.39% stronger than 1,608.98/$1 on Thursday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), data from the FMDQ indicated.

The data showed that the intraday high closed at N1,615.50 per dollar on Friday, stronger than the N1,625 quoted on Thursday on the spot. Also, the intraday low appreciated to N1,524.99 on Friday, stronger than the N1,576 quoted on Thursday.

The daily FX market turnover declined by 43.59% to $137.43 million on Friday, compared to $243.65 recorded on Thursday.

At the parallel market, also known as the black market, the naira stood at 1,605 per dollar on Friday.

According to a report by Afrinvest Securities Limited, the CBN's forex reserves appreciated 0.9 percent week-on-week to settle at $34.4bn (as of March 14, 2024). Meanwhile, the activity level in the NAFEM window decreased 37.4 percent w/w to $1.0 billion.

"In the currency market, the naira strengthened against the USD at official and parallel windows. At the official window, the naira gained 1.5 percent w/w against the USD to close at N1,602.75/$1.00, while at the parallel market, the pair closed at 81,595.00/ $1.00, indicating a 31bps gain. This week, we expect rates across FX segments of the market to follow a similar trend, barring any new developments," analysts at Afrinvest said.