The value of the naira opened at N1,130 to the dollar on Monday morning, but experienced a midday surge as traders anticipated another round of dollar sales to Bureau de Change (BDC) operators this week.
By noon on Monday, the naira was trading at N1,000 to the dollar at the parallel market. Last week, the Central Bank of Nigeria (CBN) had provided $15.88 million to BDC operators at N1,101 to the dollar, which contributed to the appreciation of the naira on the streets.
The CBN typically sells dollars to BDCs at rates within the lower band quoted on the Nigeria Autonomous Foreign Exchange Market (NAFEM). Last week’s rates ranged between N1,265 and N1,100 to the dollar.
With expectations of further liquidity injections from the apex bank, the value of the naira, which began trading at N1,130 to the dollar on the parallel market, strengthened to N1,000 by midday.
This aligns with the forecast of US Bank Goldman Sachs, which predicted that the naira would trade at N1,000. Goldman Sachs Group Inc. had previously forecasted the naira to strengthen to N1,200 per dollar this year. However, they now see the potential for it to surpass that level, following various measures implemented by the central bank to address dollar scarcity.
Goldman’s Andrew Matheny remarked to Bloomberg Newswire that “this probably can run further; we would see an extension of the move to 1,000 and maybe even sub-1,000.” Despite maintaining a 12-month forecast for the naira at 1,200 per dollar, Goldman Sachs acknowledges uncertainties regarding the authorities’ ability to sustain the reform momentum, which could impact their optimistic projection.
