Naira Trends Positive, Exchange Rates Gap Slides to N28
The naira has started gaining strength, and the trend cuts across the official and parallel market due to deliberate efforts to improve the supply side. The naira appreciated by 2.94% to close at N1,548.25 per dollar in the official market. In the parallel market, Naira closed at N1,515 against the US dollar on Friday.
Given the latest quotes, the gap between official and parallel market rates has reduced to N28. Analysts attribute rapid exchange rate appreciation to the effects of the ongoing reforms by the apex bank. The central bank has started to intervene in the market by selling US dollars to boost liquidity.
A similar approach has also been channelled to the Bureau de Change. Last week, the CBN announced it will be selling $20,000 to BDCs operators with a cap on FX spread. Reacting, currency analysts said CBN’s ability to sustain FX market intervention and US dollar sales to BDCs could upturn the fortune of the naira in the near term.
CBN Speaks with Investors
At an investors’ conference held at the Nigerian Exchange, Yemi Cardoso, the CBN governor said Apex Bank cleared another USD400 million towards the outstanding FX backlog of USD2.2 billion, resulting in a remaining balance of USD1.8 billion.
Cardoso revealed that the remaining backlog, associated with five banks, would be swiftly cleared soon. The discussion underscored the CBN’s commitment to rebuilding trust within the financial ecosystem.
On FX reserves, the apex bank told investors conference that there is deliberate strategy is in place to enhance reserves accretion through various channels. Efforts are underway to tap into all potential sources, with a recent development being the reinstatement of remittance by NNPCL.
It was revealed that over the past three years, there has been a hiatus in such inflows to the CBN, contrasting sharply with the substantial USD92 billion remitted in 2012 alone.
Additionally, other highlighted factors aimed at bolstering reserves accretion encompass anticipations of improved oil production and positive outcomes stemming from ongoing reforms within the oil sector.
On another note, the encumbrances to the reserves such as the fx backlogs is something the CBN is working towards resolving in the coming days. Looking ahead, the CBN anticipates significant reserves accretion over the next one to two years, supported by these multifaceted efforts and conducive economic conditions.
Keeping a tab on the mission to foster transparent price discovery mechanisms, the CBN aims to instil confidence among market participants, thereby fostering a conducive investment environment.
In February, Brent crude oil price rose 0.2% to $81.91 per barrel, as the market anticipated OPEC+ decision on supply agreements for second quarter of the year. Nigeria’s foreign reserves close at $33.7 billion, supported by improvement in crude oil output to 1.4 million barrels per day (mbpd) from 1.3mbpd in Dec. 2023 and quick wins from ongoing FX reforms.
Recently, the apex bank alluded to about $2.0 billion inflows as positive results of the ongoing reforms with two sides approach – soft for financial markets and combative for the speculative segment. Likewise, the average daily turnover in Nigeria’s autonomous fx market segment strengthened 61.0% in February to settle at $217.1 million, according to data from FMDQ.
In its note, Afrinvest anticipates marginal improvement in the naira across markets following efforts by the CBN to mop up excess system liquidity, ramp up OMO sales at attractive rates and eliminate FX market inefficiencies.
Cordros Capital Limited said in a note that despite the recent policy actions by the CBN, the currency has remained under pressure given that the market supply remains frail. >>> Transcorp Worth Increase to N580bn after Good Earnings
“We are encouraged by the pace of reforms within the market as well as the renewed interventions by the apex bank. In our view, following through with recently implemented reforms alongside continued efforts to clear the FX backlog may lead to improved liquidity over the medium term”. #Naira Trends Positive, Exchange Rates Gap Slides to N28
