Naira strengthens to N1,590/$1 in parallel market, weakens on official window

The Nigerian Naira appreciated significantly at the parallel market on Monday, strengthening to N1,590 per US dollar, compared to N1,610 per US dollar last week. However, this gain was not mirrored in the official foreign exchange (FX) market, where the currency depreciated.

At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the Naira fell to N1,495.60 per US dollar on Monday, down from N1,474.78 per US dollar on Friday. This decline came after the currency reached an eight-month high of N1,474.78 per US dollar last week, following a series of government fiscal and monetary policies aimed at stabilizing the exchange rate.

Analysts attribute the Naira’s overall strength in recent months to multiple factors, including increased local petrol refining capacity, higher foreign exchange inflows, and the Central Bank of Nigeria’s (CBN) swift policy interventions over the past 17 months.

In January, the Naira traded between N1,506 and N1,560 per US dollar, except for the final days of the month when it strengthened to N1,493 per US dollar on January 30 and further appreciated to N1,475 on January 31. Year-on-year, NAFEM closed at N1,455.59 per US dollar at the end of January 2024, representing an approximate difference of 1.33 percent.

Despite the recent appreciation, analysts caution that fluctuations remain likely due to external factors such as global oil prices, remittance inflows, and investor sentiment toward Nigeria’s economy. Given the persistent volatility in the FX market, further interventions from the CBN may be necessary to ensure sustained stability.

The CBN has implemented various policy measures to support the Naira, including tightening regulations on Bureau De Change (BDC) operators and increasing dollar liquidity in the official market. Earlier this week, CBN Governor Olayemi Cardoso reiterated that violations of the newly launched Nigeria Foreign Exchange (FX) Code would attract strict penalties. He emphasized the CBN’s commitment to enforcing transparency and ethical conduct in the FX market.

“The FX Code marks a new era of compliance and accountability. It is not just a set of recommendations but an enforceable framework. Under the CBN Act 2007 and BOFIA Act 2020, violations will be met with penalties and administrative actions,” Cardoso stated.

Additionally, the CBN recently announced the waiver of the 2025 non-refundable annual license renewal fee for BDC operators. In a circular signed by John S. Onojah, Acting Director of the Financial Policy and Regulation Department, the CBN said the move aims to ease financial obligations for BDC operators and promote stability in the FX market.

This waiver aligns with the CBN’s broader strategy to support the transition to a new regulatory structure for BDC operations, following the release of the Regulatory and Supervisory Guidelines for Bureau De Change Operations in Nigeria, 2024.

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