The Nigerian naira surged to an intra-day high of N1,582 against the US dollar on Wednesday, marking a significant peak amidst a substantial decline in forex turnover. Data reveals a stark 56.58% drop in forex turnover, plummeting to $117.87 million.
Despite marginal decreases observed in both official and black-market exchange rates, recent improvements in forex turnover are attributed to the Central Bank of Nigeria’s (CBN) efforts to combat suspected instances of excessive foreign currency speculation and hoarding by Nigerian banks. However, challenges persist in the forex market despite these interventions.
At the close of business, data sourced from the Nigerian Autonomous Foreign Exchange Market (NAFEM) indicates a 0.26% depreciation of the naira to N1503 against the dollar. This represents a loss of N3.93 compared to the previous day’s close. In the parallel forex market, the naira depreciated marginally to N1,545/$1, reflecting a 1.81% decrease from the previous day’s rate.
Recent announcements by the Central Bank of Nigeria signal significant reforms in the foreign exchange market, signaling a potential shift towards a market-driven exchange rate mechanism and paving the way for a free float of the naira. A circular issued by the CBN removes caps on international money transfer operations and outlines changes including the discontinuation of caps on interbank foreign exchange transactions spread and lifting of restrictions on the sale of interbank proceeds.
The objective of these ongoing reforms is to promote a market-based price discovery system, with an emphasis on transparency and ethical standards in forex transactions. The CBN highlights the importance of conducting forex transactions on a “Willing Buyer and Willing Seller” basis, ensuring flexibility in exchange rates determined by market forces. Authorized dealers are mandated to adhere strictly to high ethical standards in conducting their foreign exchange transactions.
These developments underscore the evolving dynamics of Nigeria’s forex market and the efforts by regulatory authorities to foster stability and transparency in currency exchange operations.
Credit: Nairametrics
