Forex turnover grew by 92.93% to $142.63 million as the Nigerian naira further appreciated against the dollar on Tuesday, 5th December 2023, closing at N806.73/$1 at the official market.
The domestic currency appreciated 3.85% to close at N806/73 to a dollar at the close of business on Tuesday, data from the NAFEM where forex is officially traded, showed.
- This represents an N31.04 gain or a 3.85% increase in the local currency compared to the N837.77 it closed on Monday.
- The intraday high recorded was N1150/$1, while the intraday low was N757/$1, representing a wide spread of N393/$1.
- According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $142.63 million, representing a 92.93% increase compared to the previous day.
However, the naira dropped marginally at the parallel forex market where forex is sold unofficially, the exchange rate appreciated by 0.43%, quoted at N1170/$1, while peer-to-peer traders quoted around N1165.23/$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 governing council of, the Chartered Institute of Stockbrokers (CIS) and the Managing Director, of Arthur Steven Asset Management Limited, Mr. Olatunde Amolegbe in an exclusive chat with TheTimes said for the exchange rate to be stable, market and participants confidence is key.
- “Confidence is what makes foreigners want to come to invest in your country and make locals want to keep their investments here.
- “In the absence of these dynamics, demand will naturally outstrip supply and you see the sort of instability we are experiencing now.
- “I think the decision to clear FX commitment backs 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 at effecting 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/CEO, of Financial Derivatives Company Limited, Bismarck Rewane had said in a report that the naira is expected to remain volatile on 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.