The naira appreciated by N137.69 against the United States dollar over the course of one week, following the introduction of the Central Bank of Nigeria’s new foreign exchange platform.
According to data from the CBN’s website, the closing exchange rate, which stood at N1,672.69 per dollar on Friday, November 29, 2024, rose to N1,535/$ by Friday, December 6, 2024. This marked an 8.24% gain for the week.
The currency’s improvement has been attributed to the operationalization of the new FX platform, which has increased liquidity and stability in the foreign exchange market. The CBN’s platform has facilitated more transparent trading, reducing the gap between the official and parallel markets, and helping stabilize the naira.
During the week, the naira saw a steady strengthening against the dollar, with fluctuations each day. On Monday, December 2, the exchange rate rose by 0.76% to N1,660/$, with the highest rate reaching N1,678/$ and the lowest at N1,650/$. By Tuesday, December 3, the closing rate was N1,625/$, marking a 2.11% increase. On Wednesday, December 4, the naira strengthened further, rising by 1.05% to N1,608/$, while Thursday, December 5, saw another rise of 2.55%, bringing the rate to N1,567/$. The naira closed the week at N1,535/$, marking a 2.04% increase, with the highest rate recorded at N1,575/$ and the lowest at N1,510/$.
This improvement follows the CBN’s directive issued on Tuesday, November 26, 2024, requiring all banks in the interbank FX market to adopt the Bloomberg BMatch system for trading. This platform, which became operational on December 2, aims to enhance transparency and operational efficiency in Nigeria’s FX market by introducing an automated trade-matching system that improves market integrity and facilitates better price discovery.
The CBN also issued guidelines for the interbank FX trading system, setting a minimum tradable amount of $100,000 with incremental clip sizes of $50,000 to ensure greater transparency and efficiency in the FX market.
In addition, Nigeria’s return to the international bond market on Monday, December 2, 2024, raising $2.02 billion through Eurobonds, significantly boosted liquidity for the naira. The offering, which was oversubscribed by $9.01 billion, included $1.05 billion in 10-year bonds with a 10.375% coupon rate and $700 million in 6.5-year Eurobonds maturing in 2031 at a 9.625% coupon rate. This has further strengthened dollar liquidity in the country, complementing the introduction of the new FX platform.
By the end of the week, the naira recorded one of its best performances in recent months, closing at N1,535/$, reflecting the momentum built since the launch of EFEMS. The parallel market, where forex is sold unofficially, saw an even sharper decline in the exchange rate, with the naira trading at N1,570/$ by the end of the week, down from N1,700/$ earlier. Over the weekend, the naira rose further, peaking at N1,530/$ on Saturday morning before settling at N1,580/$ on Sunday.
Reactions from the Organized Private Sector (OPS)
Dr. Muda Yusuf, CEO of the Centre for the Promotion of Private Enterprise, welcomed the naira’s appreciation but emphasized the need for continued efforts to sustain it. He pointed out that the naira’s improvement would ease the high cost of doing business and inflation. Yusuf attributed the recent gains to a combination of factors, including improved reserves (reaching $40 billion), consistent foreign exchange inflows, and the CBN’s interventions in the market. He stressed that the sustainability of the naira’s strength depends on the fiscal environment, calling on the government to moderate its deficit, debt, and expenditure levels to avoid new pressure on the currency.
Adeyemi Oyerinde, Director-General of the Nigeria Employers’ Consultative Association, also welcomed the naira’s appreciation, particularly the 8% gain recorded in the last week. He credited the improvement to factors such as the recent Eurobond issuance and the rise in diaspora remittances. To sustain and further enhance the naira’s value, Oyerinde recommended that the government increase crude oil production for export, improve forex management, promote non-oil exports, and encourage domestic refining to reduce reliance on imported fuels. He also advocated for greater patronage of locally made goods and services to help stabilize the exchange rate.
In conclusion, while the recent naira appreciation is a positive development, stakeholders in the private sector have called for continued efforts to ensure its sustainability through sound fiscal and monetary policies.
