In a remarkable turn of events, the Nigerian naira witnessed a substantial appreciation against the US dollar, reaching a new monthly high of N780.14/$1 at the official market on November 10, 2023.
This surge has provided a welcomed relief, defying expectations that the recent move by the Central Bank of Nigeria (CBN) to clear some of its forex backlogs would only marginally boost confidence in the currency.
The naira’s impressive gain represents a significant 27.77% increase, closing at N780.14 to a dollar, compared to the N996.75 recorded the previous day.
The new rate marks an all-time high, surpassing the previous record of N776.14 on November 3rd.
The intraday high and low were recorded at N1096.17/$1 and N700.00/$1, respectively, reflecting a wide spread of N396.17/$1.
Although forex turnover at the official NAFEM window declined by 63.24% to $84.02 million, the naira’s strength in the official market remained evident.
In contrast, the parallel forex market witnessed a 3.54% depreciation of the naira, with rates quoted at N1130/$1. Peer-to-peer traders, on the other hand, quoted around N1100/$1.
The recent move by the CBN to clear the backlog of foreign exchange forward contracts is cited as a crucial factor contributing to the naira’s newfound strength.
Chronic dollar shortages in Nigeria have posed challenges to businesses and the economy at large, with the CBN struggling to meet the demand for dollars from foreign investors and airlines.
The CBN’s effort to address the forex backlog is expected to bring relief to the business community, local lenders, and the manufacturing sector.
This development signals a positive shift in market dynamics and instils confidence among portfolio investors, international airlines, and potential foreign direct investors.
The Nigerian government’s commitment to resolving currency challenges and improving liquidity in the foreign exchange market is seen as a crucial step towards stabilising the economy and fostering increased investor confidence.
Source: Nairametrics