Naira Appreciates in Official Foreign Exchange Market
The Nigerian naira has Thursday experienced a notable appreciation, reaching N1,595.11 per dollar in the official Nigerian Foreign Exchange Market (NAFEM).
This increase, Excel Magazine International observes, contrasts with the NAFEM exchange rate surpassing the parallel market exchange rate, which closed at N1,490 per dollar on the same day.
Data from the Financial Markets Dealers’ Quotations (FMDQ) revealed that the indicative exchange rate for NAFEM decreased to N1,595.11 per dollar from N1,609.51 per dollar on Wednesday, marking a N14.4 appreciation for the naira.
Similarly, in the parallel market, the naira strengthened to N1,490 per dollar from N1,610 per dollar on Wednesday. Consequently, the disparity between the official and parallel market exchange rates narrowed to N135.11 per dollar from 49 kobo per dollar the previous day.
These developments follow recent foreign exchange guidelines released by the Central Bank of Nigeria (CBN) in preceding weeks, which have contributed to this slight improvement.
Notably, the Monetary Policy Committee increased the benchmark interest rate, known as the Monetary Policy Rate, by 400 basis points on Tuesday, elevating it from 18.75 percent in July 2023 to 22.75 percent.
Furthermore, adjustments were made to the Cash Reserve Ratio, raised from 32.5 percent to 45.0 percent, while the Liquidity Ratio was maintained at 30 percent.
Additionally, modifications to the asymmetric corridor surrounding the MPR were implemented, shifting it to +100/-700 basis points from +100/-300 basis points.
Government officials have consistently asserted that the naira is presently undervalued.
Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN), attributed this undervaluation primarily to distortions within the foreign exchange market.
Cardoso emphasized the CBN’s commitment to rectifying such distortions promptly, aiming to deter improper behavior and ensure market stability.
He further elucidated that such distortions, often caused by nefarious actors, undermine the integrity of the FX market and necessitate corrective action.
