Naira Gains Strength Against Dollar Following CBN’s Forex Backlog Clearance

Naira Gains Strength Against Dollar Following CBN’s Forex Backlog Clearance

The Nigerian naira experienced a notable resurgence against the United States dollar on Wednesday in both official and parallel markets, attributed to the Central Bank of Nigeria (CBN) successfully clearing all valid foreign exchange backlogs, a long-awaited move by market stakeholders……READ ALSO Black Market Dollar (USD) To Naira (NGN) Exchange Rate Update For March 21, 2024

Mrs. Hakama Sidi Ali, the Acting CBN Director of Corporate Communications, disclosed in Abuja that the bank had settled an inherited backlog of $7 billion in claims, with $1.5 billion recently cleared. This action aligns with the commitment of CBN Governor, Mr. Olayemi Cardoso, to enhance forex market liquidity.

In the parallel market, the naira strengthened to 1,410/dollar, while the official rate at the Nigerian Autonomous Foreign Exchange Market (NAFEM) stood at N1,492/dollar. This represents a 4.5 percent increase at NAFEM and a 13.5 percent rise in the black market from the previous day’s rates.

Market analysts attribute the naira’s gain to reduced demand from forex speculators, following strategic measures by the CBN to stabilize the currency. Recent CBN directives and enforcement actions against illegal Bureau De Change (BDC) operators by the Economic and Financial Crimes Commission (EFCC) have also contributed to curbing market volatility.

Local BDC operators reported varied trading activities, with rates ranging from N1,400 to N1,500 per dollar, reflecting the market’s response to the evolving forex landscape.

Despite the naira’s recent gains, some traders expressed concerns over potential losses, especially those who purchased dollars at higher rates. However, predictions from market participants suggest that the naira could strengthen further if the current trend persists.

The PUNCH’s investigation revealed a substantial increase in forex turnover at the official market, with a total of $11.43 billion traded within two months, marking a significant rise from previous periods.

As Nigeria’s external reserves continue to grow, reaching $34.37 billion in March 2024, the pressure on the naira/dollar exchange rate eases, reflecting the positive outcomes of the CBN’s forex policies. Furthermore, a significant increase in Diaspora remittances, reported at $1.3 billion in February, indicates a robust inflow of foreign currency, further bolstering the naira’s position against the dollar.

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