Naira Depreciates in Parallel Market, Gains Strength in Official Window

The Nigerian naira gained strength at the official forex window on Monday, following reassurances from Olayemi Cardoso, the Governor of the Central Bank of Nigeria, about the institution’s efforts to address currency volatility.

According to data from the FMDQ, the local currency appreciated by 1.09 percent, closing at 1,419.86 naira per dollar at the official forex window, compared to 1,435.53 naira per dollar on the preceding Friday.

Last week, the naira hit an all-time low of 1482.57 naira per dollar at the official window, despite efforts by the central bank and the Federal Government to enhance liquidity in the foreign exchange market. However, the currency rebounded after the Central Bank of Nigeria made several policy announcements.

Meanwhile, the naira didn’t perform as well on the parallel market, trading between 1,440 and 1,460 naira per dollar at the close of Monday’s trading session, according to Bureau de Change operators, compared to 1,450 naira per dollar on the preceding Friday.

BDC operators reported varying exchange rates, with some selling dollars at 1,455 per dollar and buying at 1,445 per dollar, while others quoted rates up to 1,460 per dollar.

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Earlier on Monday, Cardoso highlighted the central bank’s efforts to address FX supply challenges, including facilitating remittance flows, restricting banks’ ability to hold positions, and redirecting export proceeds from the energy sector through the central bank. He emphasized the importance of stabilizing the naira by addressing fundamental economic issues, controlling inflation, and fostering the growth of Nigerian businesses to promote exports.

Cardoso revealed that the central bank had settled verified FX requests worth $2.3 billion, with an outstanding FX obligation of N2.2 billion, which would be paid shortly. He noted that $2.4 billion of the $7 billion FX backlog encountered upon assuming office was subject to contention, citing various infractions such as invalid import documents and unauthorized allocations.

In September 2023, FTSE Russell downgraded Nigeria from a “frontier” to an “unclassified” market due to challenges faced by foreign investors in repatriating funds.

The central bank began clearing FX backlogs in banks in November 2023.