Nigeria’s foreign exchange (FX) reserves witnessed a notable increase, rising by USD 209.89 million week-on-week to reach USD 34.42 billion as of March 14. Concurrently, the Nigerian naira appreciated by 1.5% to NGN 1,602.75 against the US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM). However, total turnover in the NAFEM decreased by 41.6% week-to-date (WTD) to USD 743.54 million, with trades occurring within the NGN 1,425.35 – NGN 1,650.00 per USD range.
In the Forwards market, the naira rate for the 1-month contract experienced a marginal decrease of 0.1% to NGN 1,601.14 per USD. Conversely, rates increased for the 3-month (+1.4% to NGN 1,641.08/USD), 6-month (+1.7% to NGN 1,694.97/USD), and 1-year (+1.3% to NGN 1,817.32/USD) contracts.
The Central Bank of Nigeria (CBN) has implemented various initiatives aimed at stabilizing the naira, including addressing FX backlogs, increasing domestic interest rates to enhance the attractiveness of naira-denominated assets, and supplying dollars to Bureau de Change (BDC) operators. These efforts have started yielding positive outcomes, as evidenced by decreased naira volatility in the FX market.
Despite persistently low forex supply leading to incomplete clearing of FX backlogs, analysts anticipate subdued naira volatility in the short term. This expectation is supported by reduced currency speculation, driven by the CBN’s ongoing monetary tightening measures and improved liquidity from increased forex inflows from Foreign Portfolio Investors (FPIs).
The initiatives by the CBN underscore its commitment to stabilizing the naira and fostering a conducive environment for economic growth. As the FX market continues to evolve, stakeholders are closely monitoring developments to navigate effectively amidst changing dynamics.
