The Nigerian naira has rebounded against the United States dollar in the parallel market, closing at 850/dollar. This rebound comes two days after the Central Bank of Nigeria (CBN) announced its planned intervention in the foreign exchange market. The naira had previously been sold at around 950/dollar and further improved to 915/dollar before reaching its current rate.
Bureau de Change operators reported buying and selling the naira within the range of 830/$ to 850/$, indicating a decrease in demand compared to the previous week. Similar trends were observed at different locations, including the Lagos airport and Abuja’s central business district.
The CBN’s announcement of upcoming measures to stabilize the naira, including addressing issues in the parallel market, has led to increased caution among speculators. The CBN’s Acting Governor, Folashodun Shonubi, assured the public of the bank’s efforts to improve liquidity and achieve stability in the forex market. He noted that fluctuations in the parallel market were not solely driven by economic factors but also by speculative demand.
The CBN’s efforts are particularly aimed at tackling the issue of a weaker naira, which has been exacerbated by the removal of certain restrictions on foreign exchange trading and the scrapping of petrol subsidies, among other factors. Additionally, the Nigerian National Petroleum Limited secured a $3 billion emergency loan to help stabilize the naira, although analysts remain divided on whether this amount will be sufficient to achieve the desired stability.
Opinion:
The Nigerian economy’s heavy reliance on oil exports makes it susceptible to fluctuations in global oil prices and foreign exchange rates. The recent interventions by the CBN and the government’s policy changes, such as the removal of fuel subsidies and the liberalization of foreign exchange trading, have both intended and unintended consequences for the naira’s value.
The rebound of the naira in response to the CBN’s announcement underscores the importance of policy clarity and consistent communication from the central bank. Investor confidence can be influenced by the CBN’s commitment to addressing currency stability and curbing speculative behavior.
However, the stability of the naira in the parallel market does not necessarily reflect a complete stabilization of the currency across all market segments. Achieving lasting stability will require a comprehensive approach that addresses economic fundamentals, reduces dependence on oil, encourages non-oil exports, and attracts foreign investment.