The Nigerian naira has strengthened further across the foreign exchange (forex) markets amid expectations that the national currency will continue to gain weight in the period ahead.

At the Nigerian Autonomous Foreign Exchange (NAFEM), the naira appreciated by 9.5 per cent to close weekend at N1,142.38 per dollar. At the parallel market, naira inched up by 0.4 per cent to close at N1,230 per dollar.

At the forwards market, contracts appreciated, underlining the confidence in the stability of the national currency in the meantime. The on-month contract gained 5.4 per cent to close at N1,212.79 per dollar, three-month forwards rose by 4.3 per cent to N1,248.89 per dollar while the six-month and one-year contracts appreciated by 4.2 per cent and 5.3 per cent to N1,304.74 per dollar and N1,404.46 per dollar.

Daily average turnover at NAFEM dropped by 44.2 per cent to $374.1 million, with trades consummated within the N1,200 and N1,261 per dollar band.

Meanwhile, Nigeria’s forex reserves remained flat at $33.36 billion.

Afrinvest West Africa stated that it expected the naira “would continue to strengthen as the CBN intensifies efforts to bolster liquidity in the market”.

Capital Group said the apex bank has strategically intervened in the forex market to guide market direction and strengthen confidence.

“This intervention, along with improved forex liquidity, has led to the recent appreciation of the naira. Looking ahead, barring any shock, the naira is expected to remain stable, supported by improved forex liquidity conditions due to sustained inflows from foreign portfolio investments (FPIs) and reduced speculation activities,” Cordros Capital Group stated.

Analysts at Financial Derivatives Company (FDC) had earlier said they expected the naira to remain stable in the meantime, given the monetary stance of the CBN.

Managing Director, Financial Derivatives Company (FDC), Mr. Bismarck Rewane, said the monetary stance suggests further stability in naira and increase investors’ confidence in the economy.

He noted that the high interest rate is expected to support investment inflows from portfolio investors, which combined with a quadruple in remittance inflows and rebounding oil and non-oil export earnings, will support external reserves, aiding the CBN’s intervention efforts at the official window.

“Essentially, the naira’s stability will continue amid higher interest rates,” Rewane stated at the weekend.

He said while it may still take some short time for exchange rate gains to translate to reduced commodity prices in the open markets, “the future holds bright promises”.

Governor, Central Bank of Nigeria (CBN), Dr Olayemi Cardoso, has outlined that ongoing efforts to strengthen the country’s forex position would lead to increased stability in forex reserves and naira.

According to him, the collaboration with Ministry of Finance and the NNPCL to ensure that all forex inflows are returned to the CBN will greatly enhance forex flows and contribute to the accretion of reserves.

“The expected stability in the foreign exchange market for 2024 can be attributed to the reduction in petroleum product imports and the recent implementation of a market-determined exchange rate policy by the CBN. This reform is designed to streamline and unify multiple exchange rates, fostering transparency and reducing opportunities for arbitrage. The resulting consistent and stable exchange rate will not only boost investor confidence but also attract foreign investment, elevating Nigeria’s appeal to global investors.

“We are implementing a comprehensive strategy to improve liquidity in our forex markets in the short, medium, and long term. Our focus is on addressing fundamental issues that have hindered the effective operation of our markets over the years,” Cardoso said.

He pointed out that the apex bank understands that upholding the integrity of financial markets is crucial for building confidence, thus it remains committed to decisively address any infractions and abuses.

He noted that in efforts to stabilise the exchange rate, the CBN prioritises transparency and a market environment that enables the fair determination of exchange rates, ensuring stability for businesses and individuals alike.

“We believe that the naira is currently undervalued and, coupled with coordinated measures on the fiscal side, we will expedite genuine price discovery in the near term. This coordinated approach will contribute to a more balanced and stable exchange rate,” Cardoso said.

Credit: thenationonlineng.net

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