Nigeria Witnesses Highest Dollar Supply in 19 Months as Naira Appreciates in Official Market

• The foreign exchange market has seen a rise in dollar supply, hitting a 19-month high since June 2, 2023
• The development is reportedly due to various reforms by the Central Bank of Nigeria
• The move has reflected in the naira, which is appreciated against the dollar in the official market

Pascal Oparada has over a decade of experience covering Tech, Energy, Stocks, Investments, and Economy.

Nigeria's foreign exchange market witnessed the highest turnover of $844 million on February 3, 2024, a 19-month high since June 2, 2023, data from FMDQ Securities Exchange said.

The amount is three times higher than the $266 million traded on February 1 2024.

CBN's reforms boost naira's performance

The rise can be attributed to the latest reforms by CBN Governor Olayemi Cardoso, who unveiled various strategies to enable the naira's performance against the US dollar.

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According to a BusinessDay report, there is better transparency in the official market and banks are mandated to dispose of excess dollars.

The apex bank also removed the cap on International Money Transfer Operators (IMTOs) transactions.

The improved FX supply has been reflected in the naira, which was recently devalued by the Nigerian government for the second time in eight months.

Naira appreciates in official market

The naira strengthened to N1,419 per dollar on Monday, February 5, 2024, as against the N1,435 traded on Friday, February 2, 2023.

The parallel market rate remains adamant about the reforms, leading to fears that it may drift farther away from the official market rate.

Black market traders sold the dollar at N1,455 on Tuesday, February 6, 2024, leading to a 2% gap in the official market rate.

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CBN discover fraudulent FX claims

The development comes as Cardoso has said there is about $2.4 billion out of the Nigerian government's reported $7 billion outstanding foreign exchange liabilities that need to be validated, Legit.ng reported.

He said the amount is putting pressure on the naira and causing volatility in the FX market.

In an interview with Arise Television, Cardoso revealed that the bank had settled verified Forex requests amounting to $2.3 billion, adding that current outstanding obligations stood at $2.2 billion.

The apex bank's boss indicated that part of the $7 billion outstanding claims was fraudulent, stressing that the bank commissioned a forensic audit by Deloitte and found that the amount was bogus.

He said the outstanding FX liabilities would be addressed soon, stating that the bank would not pay for Forex requests that the bank did not validate.

The CBN boss said he was not against the bank's loan intervention schemes. He stated that liquidity injections were responsible for current distortions, including economic inflation, because they were improperly managed.

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“$2.4 billion fake claims”: CBN governor shares reason for naira depreciation

According to him, loans and economic advances amounted to about N40 trillion, 25% of which are CBN interventions.

The naira gains more ground against US dollar in official market

Legit.ng reported that the Naira appreciated against the United States Dollar in the official foreign exchange market on Monday, February 5, 2023.

Data from the FMDQ securities showed that the Naira gained 1.1% or N15.67 against the dollar on Monday, closing at N1,419.00/$1 compared to last Friday’s closing value of N1,435.53/$1 on the Nigerian Autonomous Foreign Exchange Market (NAFEM) window.

The Nigerian currency also appreciated against the pound sterling in the spot market on the trading day by N57.83, settling at N1,732.88/£1 compared to Friday's rate of N1,790.71/£1.

Source: Legit.ng