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On April 16, 2024, the Nigerian Naira closed strong at N1,050 to the US dollar at the parallel market. This marks a significant appreciation from the weekend rate of N1,125 to the dollar, representing a N75 increase. At the official market, the Naira appreciated by 0.56% to close at N1,136 to the dollar.
The recent rapid recovery of the Naira can be attributed to the drop in market volatility after the Central Bank of Nigeria (CBN) started selling dollars to bureau de change operators. To ensure transparency and stability in the foreign exchange market and prevent malpractices, the CBN directed authorized dealers to make payments for personal and business travel allowances (PTA/BTA) through electronic channels instead of cash.
However, importers are facing challenges in securing necessary funds from both the official and black markets. The demand for dollars remains high, driven by legitimate needs such as business travel allowances, personal travel allowances, school fees, and medical fees. Small and medium enterprises (SMEs) are also affected, as evident in the use of Form Q.
Addressing the Challenges
Richard Obire, a former executive director of Keystone Bank Limited, suggests that Nigeria needs to reverse its heavy reliance on imports for goods and services to save the Naira. Additionally, the outflow of capital due to corruption hinders the country’s ability to produce at a scale that can create widespread prosperity and support the Naira.
Bismarck Rewane, the Managing Director/CEO of Financial Derivatives Company Limited, believes that the Naira’s rebound will ease cost pressures. He attributes the appreciation of the Naira to the sanitization of the forex market, increased forex supply, and a decrease in the demand for dollars. The settlement of the $7 billion verified forex backlog of forward commitments has also boosted confidence in the CBN.
Looking ahead, the prospects for forex earnings are promising, with foreign portfolio investments on the rise. Nigeria’s key export commodities, such as cocoa and oil, have seen significant price surges, further supporting the Naira’s stability.
This article was updated 1 month ago
