Naira Rebounds Against Dollar as CBN Unveils Stronger Official Exchange Rate
- Naira gains against the dollar amid improved liquidity and reduced corporate demand
- Forex turnover plummets 50% despite strengthened exchange rate, signalling lower market participation
- Analysts remain optimistic about naira's stability, expecting continued foreign exchange inflows
Pascal Oparada is a journalist with Legit.ng, covering technology, energy, stocks, investment, and the economy for over a decade.
The Nigerian naira recorded a modest gain against the United States dollar in the official foreign exchange market on Wednesday, as improved dollar liquidity and weaker corporate demand helped strengthen the local currency.
Fresh data released by the Central Bank of Nigeria (CBN) showed the naira closed at N1,382.1841 per US dollar, improving from N1,383.0755 recorded in the previous trading session.
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The latest appreciation reflects continued stability in the official market despite a slowdown in trading activities among banks and authorised dealers.
Improved dollar supply lifts naira
Market data showed that foreign exchange transactions in the Nigerian Foreign Exchange Market (NFEM) were completed within a range of N1,379.50 to N1,384.50 per dollar, pointing to healthier liquidity conditions compared to previous sessions.
Analysts attributed the naira's recovery to an increase in dollar supply and reduced pressure from corporate demand, allowing the local currency to regain some ground against the greenback.
The improved liquidity environment helped offset weaker market activity and supported the naira's performance throughout the trading day.
FX turnover drops by 50%
Despite the stronger exchange rate, overall trading activity declined sharply.
According to official CBN figures, total interbank foreign exchange turnover fell to $121.73 million, representing a 50% drop from the $243.10 million recorded on Tuesday.
Trading activity among banks and market makers also slowed considerably, with the number of completed interbank deals falling to 115 transactions, down from 140 in the previous session.
The decline in turnover suggests fewer market participants were actively trading, even as dollar availability improved.
Parallel market shows mixed performance
The naira also posted a slight gain against the dollar in the parallel market, supported by increased foreign currency supply.
However, the local currency weakened against the British pound and the euro as demand for the two currencies remained relatively stronger.
Currency dealers said demand for travel, school fees and international business payments continued to support the pound and euro, keeping them elevated despite the naira's improved performance against the dollar, according to a report by MarketForces Africa.
Outlook remains positive
Market observers expect the naira to remain relatively stable in the near term, provided foreign exchange inflows continue to improve.
They note that stronger liquidity in the official market could help contain volatility, although sustained demand for foreign currencies may continue to exert pressure on the pound and euro.
The CBN's ongoing reforms aimed at improving transparency and boosting FX supply are also expected to support market confidence in the coming weeks.
Oil prices hold steady
Meanwhile, global oil prices ended Wednesday with marginal gains as geopolitical tensions in the Middle East continued to influence market sentiment.
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U.S. West Texas Intermediate (WTI) crude for August delivery rose 26 cents to settle at $79.60 per barrel, while Brent crude for September delivery gained 22 cents to close at $84.95 per barrel.
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Dollar slides as naira trades at new rate
Legit.ng earlier reported the recent fluctuations in the US dollar and Nigeria's naira amidst easing inflation data and geopolitical tensions impacting oil prices.
As the naira faces ongoing depreciation despite the dollar's weakness, the financial implications for Nigeria's economy continue to unfold, raising significant concerns for both investors and consumers alike.
Source: Legit.ng
