Business
Jubilation as dollar crashed, new rate emerges
The exchange rate of the Dollar to the Naira in the black market serves as a stark indicator of the ongoing foreign exchange supply challenges facing Nigeria.
As the official market remains constrained by stringent regulations enforced by the Central Bank of Nigeria (CBN), many individuals and businesses find themselves increasingly dependent on the parallel market to fulfill their currency needs.
The naira traded near a five-month high at 1514.86/$ on the official window at the close of last week, according to data from the Central Bank of Nigeria.
This indicates a strong start to September for the domestic currency, which started the month at 1,526.09/$ before closing at 1,514.86/$ on Thursday at the Nigerian Foreign Exchange Market.
The naira had last strengthened below the 1515/$ mark on March 6, when it closed trading at 1,512.30/$ on the NFEM. At the parallel market, it also appreciated, rising to 1,538/$, a 0.02 per cent strengthening.
Analysts maintain that the strength of the naira has been supported by improved liquidity and sustained dollar inflows. The Central Bank of Nigeria also intervened in the market to the tune of about $15bn.
Reviewing the FX market in the past week, AIICO Capital said the FX market opened the week on a calm note, with balanced flows keeping rates stable around $/N1527–1533 and no need for CBN intervention.
“Mid-week, offshore supply and opportunistic buying supported sentiment, lifting NAFEX fixing to $/N1528.13. Activity remained fluid with tight bid-offer spreads, as rates retraced to $/N1527.00 before stabilising.
Momentum improved further as the CBN intervened with $15m, and additional portfolio flows boosted supply, driving a sharp rally to the $/N1519–1523 range.
“By week’s end, the naira sustained gains, trading between $1508.00 and $1529.00. Overall, the currency appreciated strongly, closing at $/N1,514.8671,” said the AIICO Capital experts.
The weekly market report from Cowry Asset Management read, “In the coming week, we expect the naira to trade relatively stable across both the official and parallel markets, supported by sustained dollar inflows and a modest buildup in external reserves. However, pressures from speculative demand and global oil price volatility may cap further gains. The outcome of the OPEC+ meeting will be a key driver for crude oil prices, with any adjustments to production levels likely to influence Nigeria’s external earnings and, by extension, FX market dynamics.”
On the macroeconomic front, the country’s external reserves recorded a modest uptick, rising 0.10 per cent week-on-week to $41.31bn from $41.27bn, largely supported by stronger foreign inflows.
Analysts maintained that this increase in reserves provides an important buffer against external vulnerabilities such as volatile oil prices and currency pressures. It also offers the CBN greater capacity to intervene in the foreign exchange market when necessary, helping to stabilise the naira in the near term.
The outlook for the naira remains stable in the near term, supported by improved US dollar supply.
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