Naira Strengthens for Third Week in Official Foreign Exchange Market
The Nigerian Naira has continued its upward trajectory, appreciating against major global currencies in the Nigerian Foreign Exchange Market (NAFEM) for the third consecutive week. This positive movement follows a significant policy shift by the Central Bank of Nigeria (CBN), which now allows licensed Bureau de Change (BDC) operators to participate directly in the official market.
Exchange Rate Details and Market Performance
On Wednesday, the Naira gained N2.07 or 0.15% against the US dollar, closing at N1,348.95 per dollar compared to N1,351.02 on Tuesday. It also strengthened by N6.46 against the British pound to N1,840.11 per pound and by N6.36 against the euro to N1,600.13 per euro. At the GTBank foreign exchange counter, the Naira appreciated by N5 to settle at N1,358 per dollar, while the parallel market rate held steady at N1,430 per dollar.
CBN Policy Changes and BDC Participation
The appreciation is largely attributed to a circular issued by the CBN's Trade and Exchange Department, signed by Director Musa Nakorji on Tuesday, February 10. This directive permits BDCs to purchase up to $150,000 weekly from the official market through authorised dealer banks. The CBN has imposed strict reporting and transparency requirements, including mandatory electronic returns, selling unutilised balances within 24 hours, and limiting cash settlements to a maximum of 25% per transaction, with all settlements conducted via licensed financial institutions.
Expert Analysis and Market Sentiment
Financial market analysts have reacted positively to the policy, predicting further strengthening of the Naira. Aminu Gwadabe, President of the Association of Bureau De Change Operators of Nigeria (ABCON), stated that the new directives will enhance dollar liquidity at the retail level, provide a reliable source of dollars for operators, and boost investor confidence in the BDC sub-sector and broader financial industry.
Tunde Amolegbe, CEO of Arthur Stevens Asset Management, noted that a firmer Naira will benefit companies with significant foreign currency-denominated inputs, particularly in the consumer goods and industrial sectors. Ayotunde Olubunmi, Head of Financial Institutions at Agusto & Co., described the development as part of broader CBN efforts to reduce distortions in the forex market, aiming to narrow spreads between official and parallel rates and promote a more unified exchange rate framework.
Context and Importance of Foreign Reserves
This appreciation aligns with earlier reports highlighting the role of Nigeria's foreign reserves in supporting currency stability. Foreign reserves act as a buffer in the international foreign exchange market, allowing the CBN to intervene by influencing supply and demand for the Naira. They also protect against external shocks and ensure the country's ability to meet international obligations, contributing to overall economic resilience.
