Naira Gains Again Following CBN Reforms

The naira showed strength at the official market, quoting N1,560.75/$, and this development has been attributed to the many reforms of the Central Bank of Nigeria (CBN).

At the close of trading at the foreign exchange market on Tuesday, the naira increased by 0.79% as the dollar was quoted at N1,560.57, which was a little bit better than how it was quoted on Monday for N1,572.86 at the Nigerian Autonomous Foreign Exchange Market (NAFEM)

According to the report, the intraday high closed at N1,626.50 per dollar on the spot on Tuesday, while the intraday low closed at N1,415/$1 on the same day.

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On Tuesday, the daily foreign exchange market turnover was $195.13 million.

Also, at the parallel market, also known as the black market, the naira strengthened further to 1,570 per dollar, as opposed to 1,590, which closed on Monday.

With this gain, some analysts expect the naira to stabilise more this week following the introduction of policy measures by the Central Bank of Nigeria.

Part of the reforms that led to the adjustment of the naira against the dollar in the FX market are the unification of the foreign exchange market, the removal of all margin limits for International Money Transfer Operator (IMTO) remittances, the introduction of a two-way quote system, and the broad reforms in the Bureau De Change (BDC) segment of the market to restore stability.

In his recent statement, the CBN governor, Mr Cardoso said, "This strategic move also holds the potential to attract the capital inflows necessary to enhance liquidity in the foreign exchange market and bolster the currency in the immediate term."

The decision at the February meeting, which was the very first to be conducted by Cardoso since his appointment in September last year, is a move away from President Bola Ahmed Tinubu's desire that the interest rate be reduced to allow small businesses increased access to cheap funding.

In his statement at the last MPC, Cardoso voted to increase the benchmark interest rate to 23%, against the 22.5% that many MPC members voted for, the highest rate thus voted at the meeting.

His basis for increasing the rate is to curb the spiraling inflation in the country and further drive investments in the country. The inflation rate in the country, which has refused to abate, spiked to 31.7% in February, further giving reasons for a hawkish monetary policy.

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

The CBN recently announced a remarkable upswing in Diaspora remittances, soaring by 433 percent to reach $1.3 billion in February, compared to $300 million in January.