Nigeria’s local currency, the Naira, has recently seen a significant appreciation against major global currencies, driven by the new foreign exchange market system introduced by the Central Bank of Nigeria (CBN)......Read The Full Article>>.....Read The Full Article>>
Bankers attribute this surge to the Electronic Foreign Exchange Matching System (EFEMS), which began operations last Monday. In a circular, the CBN directed banks to implement the Bloomberg BMatch as the EFEMS for trading activities in the forex market starting December 2, 2024.
The CBN stated: “Banks are strongly advised to liaise with Bloomberg representatives to expedite the onboarding process and address any technical or operational concerns promptly. The CBN will deploy its regulatory power to enhance the implementation of this directive and reserves the right to impose sanctions when necessary.”
For the first time since May 2024, the Naira recorded five consecutive days of appreciation across all segments of the foreign exchange market last week. It closed at N1,535 and N1,555 to one US dollar in the official Nigerian Foreign Exchange Market (NFEM) and the parallel market (black market), respectively, over the weekend.
A bank executive, who spoke on condition of anonymity, provided insights into the new system’s impact: “The system seems to be quite good. It appears to be achieving its goal as you get a feel of where the market is in real-time. People are putting up orders on the system, matching trades, and helping with market color. The Naira has appreciated since its launch, and the CBN has also intervened using the system. Time will tell if the market appreciation can be sustained, but there will definitely be some equilibrium down the line.”
Following this development, the margin between the parallel market and NFEM rates narrowed to N20 per dollar from N118 per dollar at the close of trading last weekend. Data from the Daily Nigerian Foreign Exchange Market (NFEM) published by the CBN showed that the Naira has gained N168 or 9.8 percent from the previous week’s closing rate of N1,720 per dollar, marking the largest weekly gain this year.
Data from FMDQ revealed that the Naira had experienced sustained depreciation this year in the official market, moving from N907.11 per dollar in January 2024 to N1,520.4 per dollar by May; N1,603.8 per dollar in July; and N1,730 per dollar in October. The trend reversed to the N1,600 threshold in the same month through November. The rate of depreciation was worse in the parallel market, where it hit as low as N1,775 per dollar at the end of November 2024.
Black market traders noted that the continuous daily appreciation of the Naira in the parallel market was due to the availability of dollars, leading individuals to struggle to sell. Mr. Yakubu Giwa, a black market trader, said: “Today (last Saturday) the Naira stood at N1,500 per dollar. We black market traders are struggling to sell what we bought. The current appreciation of the Naira is a result of activities such as people in the diaspora returning home and those in the country spending money on food items and other preparations for the festive season.
This happens every year during this period. People in the diaspora are also sending money to their families in Nigeria, resulting in more inflows. Individuals with dollars are bringing them out, seeing the intense appreciation, but many are unable to sell because those in the business are still struggling to sell theirs.
The market dealers are afraid of bearing losses because the Naira might appreciate to N1,300 or N1,200 per dollar before next weekend. So, they are cautiously buying dollars.”
Apart from the dollar, the exchange rates of other foreign currencies and prices of commodities like gold are also going down.
Mr. Umoru Yahaya, another black market trader and gold seller, said: “Apart from the appreciation of the Naira against the dollar, it is also appreciating against the pound sterling, euro, and other foreign currencies.
Yesterday I traded sterling at around N2,200, today (last Saturday) it is around N1,700. Look at the value of gold that was N150,000 per gram two weeks ago. It has also dropped to N120,000 and is going to N115,000 per gram as of today. The price of silver per gram is now N20,000 per gram; we sold it for N50,000 per gram two weeks ago.
Those harboring dollars in their houses are unable to sell because of the appreciation pressure, which has made many of us very cautious about the quantity of dollars we buy to avoid losses. This morning, the dollar traded for as low as N1,500 per dollar, and before the close of the day, it might reach N1,450 per dollar.