Nigeria: Naira Appreciation in Official Channels, Decline in Parallel Trading

(3 Minutes Read)

The Nigerian naira gained strength at the official Nigerian Autonomous Foreign Exchange Market (NAFEM), closing at N1,531.19 per dollar, a slight improvement from N1,536.89 on Friday. This modest appreciation follows a week in which the currency had depreciated by 1.25 percent, ending Friday at N1,536.89.

Conversely, in the parallel market, the naira weakened to N1,570 per dollar, up from N1,568 at the end of the previous week. This change reverses last week’s N12 gain against the dollar, where the currency appreciated by 0.77 percent on average, closing at N1,568.

The ongoing fluctuations in the foreign exchange market have raised alarms among financial analysts and industry stakeholders. The Association of Bureau De Change Operators of Nigeria (ABCON) voiced concerns over the naira’s instability, noting it has become one of the most unpredictable currencies globally. They attributed this to factors such as trade wars, exchange rate pressures, and speculative attacks, complicating the currency’s performance.

Despite the Central Bank of Nigeria’s (CBN) attempts to increase foreign exchange supply to banks and Bureau De Change operators, the naira remains under pressure. Experts caution that while these interventions may provide temporary relief, they fail to tackle the fundamental issues plaguing Nigeria’s forex market.

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Looking forward, analysts at Cowry Assets Management Limited foresee a mixed outlook for the naira, especially as demand for the dollar rises. They note that FX users and speculators are capitalising on arbitrage opportunities while expecting the CBN to continue its weekly interventions to stabilise the currency.

At the official NAFEM window, the naira also closed at N2,025 per British Pound Sterling, N1,700 per Euro, N1,115 per Canadian Dollar (CAD), and N215 per Chinese Yuan. The naira’s movements in both markets illustrate the ongoing tension between monetary policy and market forces, with stakeholders closely monitoring the CBN’s next moves to foster a more stable foreign exchange environment.