
October 28, 2024 — The Nigerian naira has shown a mixed performance in the forex market, with a slight depreciation in the parallel market but a notable recovery in the Investors and Exporters (I&E) window. On October 25, the naira weakened by 0.12%, trading at N1,730 per US dollar, down from N1,728. This decline marks the second consecutive day of depreciation following a 0.58% appreciation on October 23, when it traded at N1,725.
In contrast, the I&E window saw the naira close at N1,601.20 per dollar, reflecting a 3.30% improvement from the previous closing rate of N1,654.09. This rebound halts a three-day depreciation streak and keeps the naira consistently above the N1,600 threshold since October 15.
Widening Gap and Increased Forex Activity
The gap between the parallel market and official rates has widened to N128.80, up from N73.91 the previous day. Recent data from the Nigerian Association of Forex Marketers (NAFEM) indicates a 69% surge in forex transactions, totaling $230.99 million compared to $136.68 million previously, signaling increased demand for foreign currency.
Central Bank Policies and External Reserves
The Central Bank of Nigeria (CBN) reported a 0.188% increase in external reserves, which rose to $39.230 billion as of October 22, marking nine consecutive days of growth. Recent CBN initiatives, including interest rate hikes aimed at curbing inflation and clearing foreign exchange backlogs, have contributed to a more stable naira.
Market Context and Future Outlook
Despite these positive developments, the naira has faced significant challenges throughout 2024, losing over 50% of its value in the official market since January. The currency started the year at N838.95 per dollar and has fluctuated significantly, peaking at N1,660.5 in October.
Key trading activity on October 24 saw the naira fluctuate between N1,696 and N1,585.43 before settling in the I&E window. Analysts are cautiously optimistic about the naira’s short-term prospects, especially with global oil prices stabilizing between $79 and $81 per barrel. CBN’s ongoing interventions may also help mitigate inflationary pressures.
Conclusion
While the naira recently crossed the N1,700 mark, market analysts suggest that the combination of favorable oil prices and proactive CBN policies could lead to a potential recovery, with hopes of returning to the N1,600 range. However, the currency’s future trajectory will depend on broader economic factors, including inflation and foreign currency supply, underscoring the importance of effective policy measures to stabilize the naira.