The Nigerian Naira witnessed a significant appreciation against the US Dollar on Monday, July 22nd, 2024, across official foreign exchange (FX) markets. This positive development follows a strategic intervention by the Central Bank of Nigeria (CBN) aimed at injecting liquidity into the market and curbing recent fluctuations.
The CBN’s intervention yielded positive results, with the official market experiencing a notable gain. The Naira appreciated by ₦96.60 against the dollar, closing at ₦1,500.32 on Monday compared to ₦1,596.92 quoted on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM). Additionally, the FX turnover volume also witnessed growth, increasing by 7.66% to $269.88 million on Monday from $250.67 million recorded on Friday.
The parallel market, also known as the black market, also displayed a positive response. The Naira closed at ₦1,570 per dollar on Monday, gaining 0.64% or ₦10 compared to ₦1,580 closed on Friday. It’s important to note that the black market typically exhibits greater volatility compared to the official market.
CBN Intervention Bolsters Naira
On Friday, July 19th, 2024, the CBN announced the sale of a total of US$106.5 million to authorized dealers over a two-day period (July 18th-19th). This intervention aimed to address the recent rise in dollar demand, attributed to a combination of factors including increased activity from corporate entities and seasonal pressures.
The CBN’s Director of the Financial Markets Department, Omolara Omotunde Duke, emphasized the bank’s commitment to maintaining a well-functioning and stable forex market, aligning with its price stability mandate. The intervention aligns with this broader strategy.
CBN Plans for Continued Support
The CBN has indicated its intention to continue providing liquidity support to various segments of the official markets in the coming weeks. This ongoing intervention is expected to further stabilize the forex market and ensure a smooth flow of foreign exchange for legitimate transactions
Duke emphasized the importance of ethical conduct among authorized dealer banks. The CBN will closely monitor compliance with existing trading rules and regulations to maintain market integrity. This focus on compliance complements the bank’s broader forex market stabilization efforts.
The CBN advises the general public to channel their foreign exchange demands through authorized banks and licensed Bureau De Change (BDC) operators. This ensures adherence to prevailing market regulations and promotes a well-functioning foreign exchange ecosystem.
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The CBN’s recent actions demonstrate its proactive approach to maintaining stability in the Nigerian foreign exchange market. The initial success of the dollar sales intervention bodes well for achieving a more balanced and predictable forex environment.
However, it is important to acknowledge that long-term stability requires a multi-pronged approach. The CBN will likely continue monitoring market activities and may adjust its strategies as necessary. Additionally, fostering a robust domestic economy that reduces reliance on foreign imports could further strengthen the Naira’s position over time.
As the CBN continues its liquidity support efforts in the coming weeks, it will be crucial to monitor the market’s reaction and adjust strategies as needed to ensure sustained forex market stability.
