'No more N927/$' - New CBN action inspires naira's recovery in official market

The Naira appreciated against the US dollar on Monday, December 4, 2023, closing at N837.77 per dollar in the official market.

The positive rebound of the Naira aligns with the expectations of experts, who hoped that the Central Bank of Nigeria's (CBN) recent moves to clear Forex backlogs would boost investors' confidence.

Naira accelerates gains by 10.47% in the official market

The Nigerian currency appreciated by 10.67% to close at N837.77 against the US greenback, according to data from the Nigeria Autonomous Foreign Exchange Market (NAFEM).

The Naira's recovery represents an N89.42 gain or about a 10.67% rise compared to the N927.19 traded on Friday, December 1, 2023.

The Naira traded at an intraday high of 10,021 per dollar and a low of N701/1, a disparity of N320 per dollar.

NAFEM's data shows that Forex turnover at the close of the trading day stood at $73.94 million, representing a 32.87% increase compared to the previous trading day.

The Nigerian currency, however, closed flat at the parallel market, where it exchanged for N1,165 to a dollar, the same as the Friday closing date.

Legit.ng reported that the CBN said it made tranche payments to about 31 financial institutions to clear the forex backlogs, which analysts say stood at over $ 7 billion.

Experts hope for a positive outcome as CBN moves to restore confidence

The backlogs were primarily responsible for the need for more investor confidence in the foreign exchange market, financial analyst and investment banker Chidi Ogbo told Legit.ng.

Ogbo said the investors were skeptical about CBN's capacity to clear the forex obligations, leading them to watch from the sidelines. "One of the good things the current CBN management has done is attempt to restore investor confidence in the forex markets.

"Now, we are seeing portfolio investors returning to the capital market, as evidenced by the positive performance of major stocks at the NGX.

"The next thing the government should do is boost export of non-oil products to earn forex and stabilize the Naira, Ogbo said.

The CBN governor, Olayemi Cardoso, stated at a recent bankers' dinner in Lagos that there are improvements in FX market liquidity as the market reacted positively to the payments made by the apex bank.

Cardoso said: "We have subjected these payments to detailed verification to ensure only valid transactions are honored. In a properly functioning market, it is reasonable to expect significant FX liquidity, with daily trade potentially exceeding $1.0 billion.

Financial pundits also said that the apex bank's current naira scarcity was an action to strengthen the local currency and ensure that inflation is reduced to the barest minimum.