Business
Naira rebounds, rising 27.16% to close at N864.29/$1 in the official market.
Naira rebounds, rising 27.16% to close at N864.29/$1 in the official market.
The naira regained ground to appreciate massively against the dollar on Monday, December 11, 2023, at the official market after it plunged to a historical low on Friday, December 8, 2023.
The domestic currency appreciated 27.16% to close at N864.29 to a dollar at the close of business, data from the NAFEM, where forex is officially traded, showed.
This represents an N234.76 gain or a 27.16% increase in the local currency compared to the N1,099.05 it closed on Friday.
The intraday high recorded was N1185.10/$1, while the intraday low was N720/$1, representing a wide spread of N465.10/$1.
According to data obtained from the official NAFEM window, forex turnover at the close of trading was $132.46 million, representing an 86.83% increase compared to the previous day.
However, the naira dropped at the parallel forex market, where forex is sold unofficially. The exchange rate depreciated by 1.26% and was quoted at N1195/$1, while peer-to-peer traders quoted around N1214.32/$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.
What economists are saying
The former President and Chairman of the governing council of the Chartered Institute of Stockbrokers (CIS) and the Managing Director of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe, said in an exclusive chat with Nairametrics that for the exchange rate to be stable, market and participant confidence are key.
“Confidence is what makes foreigners want to come to invest in your country and makes locals want to keep their investments here.“In the absence of these dynamics, demand will naturally outstrip supply, and you can see the sort of instability we are experiencing now.
“I think the decision to clear FX commitments will be positive for market confidence, but the desired impact might manifest in the medium term rather than in the short run.
“I also think the efforts at using monetary policy tools to reduce system liquidity could ultimately reduce currency speculation, but again, it’s not a silver bullet.
“Deliberate efforts need to intensify to effect structural changes that will encourage import substitution, such as improved security, better infrastructure, increased foreign direct investments, and encouraging local production,” he said.
Managing Director and CEO of Financial Derivatives Company Limited, Bismarck Rewane, said in a report that the naira is expected to remain volatile due to lingering forex supply concerns.
The dollar dearth means speculative buying is likely to continue, with an increasing number of market participants taking long positions on the dollar while shorting the naira.