The naira has significantly improved at the parallel market as it exchanges for N535 to 1 USD as at today against N570/$1 it traded for some days now, Business Compiler can report.
This represents 6.14% improvement over 2 months
Some of the player in the Forex market attributed the the recent appreciation to Central Bank of Nigeria’s intervention in the market.
A BDC operator, Abdulai told Nairametrics that eNaira launch may have also played a role in reducing the demand for dollars in the market.
“The e-Naira has reduced Nigerians’ appetite for buying dollars since through the digital currency, they can now withdraw dollars at official rates anywhere in the world,” he said.
Since the exchange rate is simply a reflection of the currency’s demand and supply. It’s safe to say that the naira’s appreciation is linked to the apex bank’s forex supply policy.
Another operators indicated the massive gain was because demand dropped in the couple of days possibly because the CBN was intervening.
Analyst at a recent had suggested that the exchange rate could strengthen in the coming weeks especially after the external reserves hit $40 billion. A room for further external loans and a sustained higher oil prices was also fingered as a possible impetus for the central bank to intervene, thus potentially impacting positively on the naira.
Business Compiler reported last month that the exchange rate had somewhat stabilized since the CBN antagonistically chided abokiFX for weakening naira. CBN stated this during the CBN MPR meeting on September 17, 2021.
On that day, the exchange rate closed at N564/$1 and soared as high as N577/$1 a few days later, but it has since sold between N570-N575/$.
The last time the exchange rate traded as low as N535/$1 was in the early September suggesting this is a two month high for the local currency.
The strengthening of the naira will be seen by the CBN as an indicator that its intervention is working even though pent up demand remains and the sources for the interventions are loans.