Naira Strengthens By 0.90% As Dollar Supply Increases

Naira Strengthens By 0.90% As Dollar Supply Increases

The Nigerian Naira has witnessed a significant appreciation against the US dollar, marking a 0.90 percent increase, fueled by a surge in supply in the official foreign exchange (FX) market on Tuesday……READ ALSO Black Market Dollar (USD) To Naira (NGN) Exchange Rate Today 13th March 2024

According to data from the FMDQ Securities Exchange, the Naira closed at N1,603.38 per dollar, a notable improvement compared to Monday’s rate of N1,617.96 at the Nigerian Autonomous Foreign Exchange Market (NAFEM).

During intraday trading, the Naira reached a high of N1,637 per dollar, showing a positive trend from Monday’s low of N1,650/$1. Additionally, the day’s lowest exchange rate strengthened, closing at N1,425.35 compared to N1,511 the previous day.

This appreciation was driven by a 27.09 percent increase in dollar supply, with transactions totaling $122.18 million on Tuesday, up significantly from $96.13 million recorded on Monday. Various contributors, including banks and other participants in the FX market, played a role in this surge in supply.

In the parallel market, the Naira also demonstrated positive momentum, appreciating by 0.81 percent to an average of N1,605 against the dollar. Exchange rates in this sector ranged from N1,600 to N1,612 for dollar transactions.

Market analysts attribute this favorable trend to the recent decision by the Central Bank of Nigeria (CBN) to raise the Monetary Policy Rate by 400 basis points to 22.75 percent. This move aims to address challenges such as high inflation rates and other economic issues.

Despite these gains, concerns persist about the stability of the Naira. The Economist Intelligence Unit (EIU) highlights ongoing challenges, including high inflation, negative real interest rates, and a scarcity of foreign reserves, which continue to undermine confidence in the Naira.

The EIU forecasts caution against expecting another devaluation but suggest leveraging foreign borrowing to bolster reserves, potentially stabilizing the Naira by the end of 2024. However, the report predicts a gradual weakening of the Naira over time, projecting exchange rates of N1,770:US$1 by the end of 2024 and N1,817:US$1 by the end of 2025.

Looking further ahead, the EIU anticipates a more significant depreciation by 2028, with an expected rate of N2,381:US$1, attributed to various monetary and fiscal policy challenges, as well as fluctuations in global oil prices.