Key Points

• Naira rises to N1,480/$ in parallel market.

• CBN reforms narrow gap between official, street rates.

• Experts say consistency crucial for sustaining currency recovery.

The naira in Nigeria rose to N1,480 per dollar on the parallel market over the weekend, up from N1,520/$ earlier in the week. This was due to increased dollar inflows and new regulatory actions from the Central Bank of Nigeria (CBN), which made the market more confident.

Street vendors and licensed Bureau de Change (BDC) operators in Lagos, Abuja, and Kano said that there were more dollars available. They said this was because the CBN had recently given out more money and was keeping a closer eye on remittance channels.

Alhaji Hassan Abdul, a currency dealer at the Lagos Allen Avenue forex hub for more than ten years, said that demand had gone down a little. “Importers are still buying, but the panic buying we saw two weeks ago has gone down,” he said.

The naira’s performance has been one of its best in the past month, and this comes as the apex bank steps up its fight against illegal dollar trade and speculative hoarding.

The CBN’s changes make the official and parallel rates closer together

Governor Olayemi Cardoso and the CBN started selling dollars to BDCs again every week for the first time in months. Analysts said that this move, along with the unification of the exchange rate windows, had helped close the gap between the official and parallel markets to about two percent.

On Friday, the official rate at the FMDQ Exchange was around N1,480/$, which was unusual because it was in line with the street rate.
The CBN’s recent order that all international money transfer companies pay remittances in naira has also increased supply, stopped people from speculating, and made the parallel market less volatile.

According to a report by Vanguard news,  Bismarck Rewane, an economist and Managing Director of Financial Derivatives Company, called the naira’s rise a “positive market signal,” but he also said that the policy must stay the same for it to last. He said, “Liquidity is getting better, but credibility and openness must stay at the centre.”

Experts say that policy coordination should continue

Experts in economics and finance have called for better cooperation between the fiscal and monetary authorities to strengthen the naira’s recovery.

Dr. Muda Yusuf, Chief Executive of the Centre for the Promotion of Private Enterprise (CPPE), said that Nigeria’s foreign exchange reforms were “finally finding direction.” He also said that rising diaspora inflows and strict monetary control were helping to keep the market stable.

He did, however, warn that the currency is still at risk from changes in the oil market and poor export performance. Nigeria’s foreign reserves are thought to be around $33 billion right now. The country produces about 1.4 million barrels of crude oil every day, which is still below the OPEC+ quota.

If liquidity improves in the next few weeks, traders think the naira could get even stronger, to about N1,450/$1.