Naira Strengthens Against the Dollar Amid Improved Forex Market Transparency.....Read The Full Article>>.....Read The Full Article>>
The Nigerian Naira saw a significant appreciation against the US Dollar on Friday, marking a positive end to the week. Data from the Central Bank of Nigeria (CBN) revealed that the official exchange rate of the Naira improved to N1,535 per dollar, up from N1,567 per dollar on Thursday, representing a gain of N32.
At the parallel (black) market, the Naira also strengthened notably, trading at N1,600 per dollar, a substantial rise from N1,715 per dollar the previous day. This reflects an appreciation of N115, signaling increased confidence in the Naira.
Factors Driving the Naira’s Gain
The improvement in the Naira’s value has been attributed to enhanced transparency in the foreign exchange market, particularly following the introduction of the Central Bank’s Electronic Foreign Exchange Matching System (EFEMS). Launched earlier in the week, EFEMS automatically matches buy and sell orders in real-time, ensuring a more efficient and transparent market. This has boosted liquidity and fostered confidence among both buyers and sellers in the market.
According to sources, the EFEMS system has also revealed that banks were holding more dollar liquidity than initially realized, further contributing to the strengthened Naira.
In addition to this, the surge in dollar inflows has been fueled by Foreign Portfolio Investors (FPIs) who have been attracted by the attractive yields on Nigeria’s treasury bills. Recent treasury bill auctions saw record-high yields, with the yield peaking at 30.71% before dropping slightly to 29.75%.
Market Outlook
Financial analysts are optimistic that EFEMS will help address long-standing challenges in Nigeria’s foreign exchange market, leading to improved market conditions and enhanced FX reserves. With increased dollar liquidity and greater market transparency, stakeholders expect the Naira’s recent gains to be sustainable, contributing to a more stable foreign exchange environment in the coming weeks.
