Naira sees significant appreciation against U.S. Dollar, closes at N791.75/$1

By Sodiq Adelakun

In a surprising turn of events, the Nigerian naira experienced a substantial appreciation against the US dollar, closing at N791.75 to a dollar on Friday, November 17, 2023.

This development has brought a sigh of relief to financial experts who had been cautiously optimistic following the Central Bank of Nigeria’s (CBN) efforts to address the foreign exchange (FX) backlog, which was anticipated to bolster confidence in the national currency.

The naira’s value increased by 6.24 percent, marking a notable N49.39 gain from the previous day’s closing rate of N841.14. The official market, particularly the Nigerian Autonomous Foreign Exchange Market (NAFEM), where forex is officially traded, recorded this significant uptick.

Despite the positive closing rate, the trading day saw a considerable fluctuation in the naira’s value, with an intraday high of N1120/$1 and a low of N701/$1, indicating a volatility spread of N419.Forex turnover at NAFEM witnessed a downturn, closing at $157.78 million, which is a 23.60% decrease from the day before.

Contrastingly, the naira experienced a slight depreciation in the parallel market, where it is traded unofficially. The exchange rate fell by 0.26 percent, settling at N1140/$1. Peer-to-peer trading platforms reflected a similar trend, with rates around N1130.60/$1.

The CBN’s recent actions, including starting to clear the backlog of FX forward contracts, are seen as a strategic move to stabilise the naira. This initiative is part of a broader effort to alleviate the currency’s pressure, provide support to the business sector, and foster overall economic stability.

Nigeria has been grappling with persistent dollar scarcities, a situation exacerbated when foreign investors withdrew from local markets amid a period of depressed oil prices. The investor retreat has led to a sustained absence of foreign capital, and the CBN has faced challenges in satisfying the dollar demand from foreign investors wishing to repatriate funds, as well as from airlines that need to remit earnings from ticket sales overseas.

The payment initiative by the central bank aligns with the announcement made on October 23 by Finance Minister Wale Edun, who indicated that Nigeria was anticipating an influx of $10 billion to enhance FX market liquidity.