Naira becomes world’s best-performing currency, continues gain after 3 days to near N1,000/$1

Following a three-day holiday break, one dollar sold for N1,125 on the streets on Friday, April 12, 2024, indicating a moderating decline in demand.

The currency was flat from the N1,120 it closed on Thursday, April 11, based on information provided by many traders who noted that trading volumes were erratic throughout the holidays.

Because banks were closed for the holiday, transactions happened occasionally, which caused the market rates to vary.

Due to the low volume of transactions, traders stressed that the prices they quoted during the holidays were not indicative of the overall state of the market.

“We are purchasing at either N1,120 or N1,115 and selling at N1,130 or N1,125 per dollar,” explained a trader at the Lagos Airport to BusinessDay on Friday.

Naira to keep rising

As a result of more dollars entering the market following the Central Bank of Nigeria's (CBN) execution of specific FX policy measures, some traders anticipate that the value of the naira would rise over N1,120 per dollar.

Goldman Sachs believes the naira will continue its record-breaking surge.

According to an analyst at Goldman Sachs Group Inc, the naira might potentially extend gains in the official market in the days ahead, assuming officials stick to their course.

“This probably can run further; we would see an extension of the move to 1,000 and maybe even sub-1,000,” Goldman’s Andrew Matheny said in an interview.

Since Goldman’s call in February, “six weeks have gone by and they’re continuing to hold the line, so that’s encouraging,” he said.

Meanwhile, based on data from FMDQthe Securities Exchange, the naira started at N1,230/$ on Friday, making it the best-performing currency in the world this month.

Following a 14% increase in March, the value of the naira relative to the US dollar increased by 12% in April.

It experienced two severe losses following the government's loosening of currency controls in June 2023, but it is recovering from them because of capital inflows and interest rate increases.

BDCs backs CBN

The Association of Bureaux De Change Operators of Nigeria (ABCON) has endorsed the CBN's most recent directive to stop using collateral denominated in foreign currencies to secure naira loans.

Aminu Gwadabe, President of ABCON, claims that the CBN's rule banning the use of non-export domiciliary account collateral for naira loans will strengthen the financial services sector, promote reserve building, and boost dollar liquidity.

The Federal Government of Nigeria's Eurobonds or guarantees from international banks, like Standby Letters of Credit, are the only forms of collateral denominated in foreign currencies that can be used for Naira loans, according to a directive issued by the Central Bank of Nigeria (CBN) to banks.