The naira hit an eight-month high of 1000 per US dollar at the black market on Tuesday, a remarkable turnaround for a currency that had looked destined to hit N2000/$ barely two months ago.
Traders reported increased dollar supply on Tuesday and said they expected the currency to strengthen further in the coming days.
Analysts say clues of where the naira is headed in the short-term may lie in the rate at which the CBN sells dollars to BDCs during an auction this week.
The CBN last Monday reviewed the exchange rate for BDC operators to N1,101 from N1251 the previous week.
The apex bank, which sells $10,000 to each BDC every week, mandated them to only sell at a spread of 1.5 percent which comes to N1,117 per US dollar.
The rate sold by the BDCs has set a defacto floor for the naira in the black market since the apex bank resumed sales to them in February.
The continuous rally in the naira comes after earlier predictions by a Goldman Sachs economist that the naira will likely trade for less than N1,000 in coming months.
The naira has gained 52.08 percent (N625) of its value against the dollar on the black market this year alone.
On the Nigerian Autonomous Foreign Exchange (NAFEM) official window yesterday, the naira also extended its winning streak as it closed at N1,136.04/$, gaining N6.32, compared to the N1,142.38/$1 it closed on Friday.
In a note to clients last week, analysts at Renaissance Capital Africa said a rating agency is expecting $5-10 billion of portfolio inflows throughout 2024.
After a period of high volatility with significant weakening since last June, the Naira has shown some improvement. This stabilization is due to the actions of the Central Bank Governor, such as raising interest rates to 24.75 percent and managing foreign exchange trades.
Foreign exchange inflows into Nigeria surged to a five-year high in March as investor confidence has improved on the back of the central bank’s reforms.
According to data obtained from FMDQ’s website, total inflows into the Nigerian Autonomous Foreign Exchange Market increased by 41.7 percent to $3.75 billion as against $2.64 billion in February – the highest level since March 2019 ($6.07 billion).
The CBN has also stepped up its intervention in the FX market with sales at both the official market and to Bureau De Change (BDC) operators who sell dollars on the streets.(BusinessDay)
