The Naira has gained significant ground against the dollar in the Nigerian Autonomous Foreign Exchange Market (NAFEM), with a recent appreciation of N40.2.
Data from the Financial Market Dealers Quote (FMDQ) reveals that the indicative rate for NAFEM closed at N1,630.45 per dollar, compared to N1,670.65 per dollar just a day earlier.
This change represents a substantial gain for the Naira, one that many have been watching closely as the Nigerian currency has faced persistent pressure in recent months.
The increase in the Naira’s value came as dollar trading volumes surged in the official market.
Turnover in NAFEM nearly tripled, jumping by 198.8 percent to $242.59 million, up from the $81.17 million traded the previous day.
The substantial rise in trading volumes highlights the growing demand for the dollar, especially as businesses and individuals seek to stabilize financial positions in light of Nigeria’s fluctuating exchange rates.
Experts believe that this surge in trading reflects both market confidence and intervention efforts by the Central Bank of Nigeria (CBN).
Economic analysts have pointed out that an increase in trading volumes often signals positive sentiment about the currency’s stability.
“The Naira’s recent appreciation could be the result of CBN’s interventions aimed at stabilizing the currency market,” remarked Dr. Emmanuel Ogundele, a financial analyst.
He added, “While this gain is promising, the Naira’s strength will need sustained support to hold its ground against the dollar.”
The impact of this appreciation, however, has widened the gap between NAFEM and the parallel market, with a margin now reaching N94.55 per dollar, up from N59.35 the previous day.
This difference signals an ongoing challenge for Nigerian consumers and businesses who still rely heavily on the parallel market.
In the parallel market, the exchange rate is typically higher, causing individuals who buy dollars outside the official channels to pay a premium.
The widening gap between the official and parallel markets often leads to difficulties for businesses with international operations.
Many importers rely on the parallel market when foreign currency is scarce in official channels, and this price gap has increased their costs.
Nigeria’s current currency challenge has its roots in various economic and policy factors, including inflation, oil revenue fluctuations, and a recent global surge in dollar demand.
Nigeria, an oil-dependent economy, relies on dollar earnings from oil exports, which often stabilize the Naira.
However, lower oil prices and fluctuating production levels have weakened the country’s dollar reserves.
For years, the Central Bank of Nigeria (CBN) has tried to manage the country’s forex situation through a range of interventions, often using reserves to support the Naira’s value.
At the same time, currency speculators in Nigeria’s foreign exchange market have added pressure on the Naira.
Speculators, who buy and hold dollars in anticipation of rising rates, create artificial demand that drives up exchange rates.
The CBN has frequently warned against such activities, which it argues destabilize the currency and add to inflationary pressure.
