Market News

by Collins Nweze | Assistant Business Editor

The naira appreciated by 1.1 per cent to close weekend at N1,600 per dollar after the Central Bank of Nigeria (CBN) injected $280 million into the official forex market through authorised dealers.

Weekly review of the foreign exchange (forex) market, indicated that the naira regained N5 per dollar, closing from N1,610 per dollar to N1,605 per dollar at the parallel market.

The local currency was recently weighed down by persistent global uncertainties from the trade war and concerns over a potentially deteriorating trade balance due to lower oil prices

Nonetheless, sustained CBN interventions are expected to help contain the risk of sharp depreciation in the near term.

In a report released at the weekend, Cordros capital disclosed that,  gross foreign exchange (forex) reserves declined for the fifth consecutive week by $111.21 million to $37.89 billion.

In the forwards market, the naira rates appreciated across the 1-month (+1.5 per cent to N1,642.03/$), 3-month (+0.8 per cent to N1,720.49/$), 6-month (+1.6 per cent to N1,802.37/$) and 1-year (+1.6 per cent to N1,979.27/$) contracts.

The CBN has continued to drive recovery of the naira across markets, with sustained interventions and policy measures.

From exchange rate unification to reduce arbitrage in the markets, introduction of electronic FX matching platform and a new FX code to enhance transparency and efficiency in the market as well as deployment of monetary policy tightening to keep inflation on check, the apex bank has demonstrated commitment to achieving sustainable economy growth and keeping the local currency stable.

Already, the latest Fitch rating moved Nigeria’s long-term foreign-currency issuer default rating (IDR) from negative to stable, meaning that the country stands a better chance of attracting foreign investment, borrow money on international markets at better interest rates, and boost investor confidence.

Fitch said: “Greater formalisation of FX activity including the Central Bank of Nigeria’s (CBN) recent introduction of an electronic FX matching platform and a new FX code to enhance transparency and efficiency, along with monetary policy tightening, has led to a greater rise in FX liquidity and general stability in the FX market after a 40 per cent depreciation in 2024, closing the spread between the official and parallel exchange rates”.

The CBN Governor, Olayemi Cardoso, disclosed that over the past year, the apex bank had undertaken critical reforms to unify Nigeria’s exchange rate, eliminating distortions and restoring transparency.

 “This unification has enabled us to clear the outstanding foreign exchange obligations, giving businesses—ranging from manufacturers to airlines—the confidence to plan and invest in the future. To further enhance the functionality of the foreign exchange market, we are introducing an electronic FX matching system, which has proven effective in other markets,” he said.

Cardoso explained that it was vital to address the disinformation circulating about a supposed demand-supply gap in the FX market, which is fueling unnecessary panic.

 “The current USD exchange rate reflects the price that the most desperate buyers are willing to pay, and this does not represent the true market value of the naira. The introduction of the electronic matching system will correct these distortions by enhancing the price discovery process. Additionally, it will significantly boost the Central Bank’s oversight and intervention capabilities, ensuring a more stable and transparent foreign exchange market.,” he said

Continuing, he said that while the Central Bank will continue to lay the foundation for price stability and foster a conducive policy environment, the role of our banks in this journey is crucial.

 “An FX market defined solely by when and how the Central Bank buys or sells dollars is inadequate for the needs of a dynamic economy like Nigeria’s. Now is the time for banks to step up to their intermediation and market-making responsibilities, providing customers with the right solutions to run their businesses and manage risks effectively,” he stated.