The exchange rate between the naira and the dollar strengthened for the third consecutive day, closing at N1,534.9/$1 on the official market. This marks the strongest level the naira has reached in 7 days.
The official NAFEX rate, which serves as the average rate and benchmark rate used by the CBN, was quoted at N1,567.65 on March 1st, 2024.
The intra-day high reached N1,600/$1, while the intra-day low was N1,425/$1.
The official exchange rate has remained below N1,600 since February 28th, indicating a gradual return to stability in the official market.
Factors Contributing to Naira’s Gain
Analysts suggest various factors contributing to the recent strengthening of the naira against the dollar. Since February 28th, the exchange rate has shown a downward trend, reassuring policymakers.
The Central Bank of Nigeria (CBN) intensified efforts to combat inflation, raising its benchmark monetary policy rate to 22.75% and implementing measures such as selling over N3 trillion in Treasury Bills and OMO bills combined.
Additionally, the CBN introduced new guidelines for the operation of Bureau De Change (BDC) operators, banning over 4,000 operators for failing to meet licensing requirements.
CBN Governor Yemi Cardoso’s virtual event with foreign portfolio investors aimed to attract hot money inflows.
The apex bank’s collaboration with security agencies to restrict operations of the cryptocurrency trading platform Binance also played a role.
Improvements and Challenges
Forex turnover in the last three days averaged $250 million per day, up from $160 million per day a week earlier. Despite improvements in the official market, the parallel market quoted around N1,600/$1.
Operators reported increased demand at the beginning of the week, indicating ongoing challenges. Nevertheless, this marks a significant improvement from the record low of N1,880 recorded on February 22nd.