Naira bounces back, rises to N831.47/$1 at the official market ?

The Nigerian naira appreciated against the dollar on Wednesday, 29th November 2023, closing at N831.47/$1 at the official market. 

The positive trajectory aligns with expectations among experts, who anticipated that the Central Bank of Nigeria’s (CBN) recent initiative to clear a portion of its FX backlog would boost confidence in the currency.

The domestic currency appreciated 6.06% to close at N831.47 to a dollar at the close of business on Wednesday, data from the NAFEM where forex is officially traded, showed. 

This represents an N50.41 gain or a 6.06% increase in the local currency compared to the N841.14 it closed on Tuesday. 

The intraday high recorded was N1159/$1, while the intraday low was N700/$1, representing a wide spread of N459/$1. 

According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $140.35 million, representing a 18.88% growth compared to the previous day. 

However, the naira weakened at the parallel forex market where forex is sold unofficially, the exchange rate depreciated by 0.26%, quoted at N1160/$1, while peer-to-peer traders quoted around N1159.47/$1. 

The Central Bank of Nigeria (CBN) has said it has made tranche payments to 31 banks to clear the backlog of foreign exchange forward obligations. 

The apex bank also disclosed that it has set up foreign exchange frameworks to address the FX issues. 

Yemi Cardoso, governor of the CBN disclosed this on Friday at the bankers’ dinner in Lagos. 

What Cardoso said

The CBN governor said: “We have already witnessed improvements in FX market liquidity in recent weeks, as the market responded positively to tranche payments which have been made to 31 banks to clear the backlog of FX forward obligations. 

“We have been subjecting these payments to detailed verification to ensure only valid transactions are honoured. In a properly functioning market, it is reasonable to expect significant FX liquidity, with daily trade potentially exceeding $1.0 billion. 

“We envision that, with discipline and focused commitment, foreign exchange reserves can be rebuilt to comparable levels with similar economies.” 
The value of the Nigerian currency has been steadily declining as the country struggles with foreign exchange illiquidity and the inability to pay down its forex backlog.