The Naira saw further appreciation as the foreign exchange (FX) market witnessed an increased supply of dollars on Friday, responding to the Central Bank of Nigeria’s (CBN) directive for banks to sell excess dollars to the official FX market.
The daily FX market turnover surged from $156.86 million on Thursday to $440.13 million on Friday. Post-trading on Friday, the Naira strengthened by 1.84%, with the dollar quoted at N1,435.53 compared to N1,461.90 on Thursday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data from FMDQ.
The intraday high remained at N1,526 per dollar, while the intraday low strengthened to N838.96/$1 on Friday, contrasting with N891 per one dollar.
Despite a recovery to N1,400 on Wednesday following CBN’s FX policies, the Naira weakened to N1,440 per dollar at the black market due to strong demand for dollars.
Nigeria’s foreign currency reserves exhibited a 1.5% month-on-month gain in January, reaching US$33.4 billion, with analysts linking the increase to approximately $3.3 billion inflows from the Afrexim bank crude-oil-tied support facility.
The CBN adjusted the regulatory framework for International Money Transfer Operators (IMTOs), lifting the cap on allowable limits and providing increased flexibility in setting exchange rates.
Additionally, the CBN set a minimum operating capital requirement for IMTOs at $1 million for foreign entities and an equivalent amount for local IMTOs.
In the money market, the average system liquidity improved significantly by 95.1%, reaching N261.3 billion in January 2024. The Overnight Policy Rate (OPR) and Overnight (OVN) rates experienced notable surges, rising by 4.3 and 4.9 percentage points to 19.4% and 20.4%, respectively.
Within the primary market, the CBN conducted two rounds of auctions, offering N288.4 billion, a 55.9% increase from the previous month. Investor appetite remained robust, with a bid-to-cover ratio of 38.7x.
The financial landscape in January showcased resilience amid liquidity shifts and heightened market activity. The appreciation of the Naira signifies a positive impact on affordability for imported goods for households, potentially leading to reduced prices, while businesses may experience lower production costs. However, businesses reliant on exports might face challenges as their products become more expensive for foreign buyers.
