The Nigerian Naira has experienced significant appreciation across all foreign exchange markets following the implementation of the Central Bank of Nigeria’s (CBN) new Electronic Foreign Exchange Matching System (EFEMS). Launched on December 2, 2024, the system aims to streamline forex trading by providing real-time market data, improving transparency, and reducing market volatility. As a result, the Naira has shown its largest weekly gain this year, with the exchange rate narrowing between the parallel and official markets to just N20 per dollar.
Bankers have praised the EFEMS for its effectiveness, stating that it allows for better order matching and market color, contributing to the Naira’s strengthening. The official market saw the Naira close at N1,535 per dollar, while the parallel market rate dropped to N1,555. Black market operators, who had faced depreciating rates earlier in the year, now struggle with an overabundance of dollars, as individuals and diaspora members bring in foreign currency for the holiday season. The increased demand for the Naira has led to cautious buying practices among traders.
The appreciation of the Naira is not limited to the US dollar, as other foreign currencies like the Euro and the British Pound are also seeing a decline in value. Additionally, the price of commodities such as gold and silver has dropped. However, the future of the Naira’s recovery remains uncertain, with experts suggesting that while the system shows promise, the market may eventually reach an equilibrium point. The success of the Naira’s recovery will depend on whether the new forex system can sustain its impact in the long term.
