The Naira appreciated massively against the dollar on Friday, 17th November 2023, closing at N791.75/$1 at the official market.
The gain had come as a relief to many experts, who had expected the Central Bank of Nigeria’s (CBN) recent move to clear some of its foreign exchange (forex)backlog to boost confidence in the currency.
The currency appreciated 6.24per cent to close at N791.75 to a dollar at the close of business on Friday, data from the NAFEM where forex is officially traded, showed.
This represents an N49.39 gain or a 5.24 per cent increase in the local currency compared to the N841.14 it closed on Thursday.
The intraday high recorded was N1120/$1, while the intraday low was N701/$1, representing a wide spread of N419/$1.
According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $157.78 million, representing a 23.60 per cent decline compared to the previous day.
However, the naira weakened marginally at the parallel market where forex is sold unofficially, the exchange rate depreciated by 0.26 per cent, quoted at N1140/$1, while peer-to-peer traders quoted around N1130.60/$1.
Backlog of forex forward contracts: The Central Bank of Nigeria (CBN) last week said it has begun to clear the backlog of foreign exchange forward contracts, a move that is expected to bring relief to the naira, the business community, and the economy at large.
The country has faced chronic dollar shortages since foreign investors exited local assets during a period of low oil prices. Since then, investors are yet to return and CBN has struggled to meet the demand for dollars from foreign investors seeking to repatriate funds or airlines seeking to send money from ticket sales abroad.
CBN’s payments follow the October 23 announcement by Wale Edun, the finance minister, that Nigeria was expecting $10 billion of inflows to improve FX market liquidity.
It will come as a relief to local lenders, who have been struggling to meet demands from customers due to chronic dollar shortages.
Toye Folorunsho, a director at the Manufacturers Association of Nigeria(MAN), said CBN’s clearing of the backlog is a good one for the manufacturing sector because a lot of manufacturers have not been able to procure their raw materials and machinery.
“The new move by CBN to clear backlogs with international lenders gives the signal that the apex bank is back in trading and business,” Gabriel Idahosa, deputy president of Lagos Chamber of Commerce and Industry, said.
“Apart from bringing back letters of credit, it generally brings back confidence in the traditional market. It restores the confidence of portfolio investors and international airlines. It will also bring foreign direct investments,” he added.