The naira and the dollar exchange rate in the official NAFEX Window appreciated N1,468.99/$1 on Monday, May 20, 2024. This marks a 1.93% increase from the N1,497/$1 rate recorded on Friday, May 17, 2024.
Last week, the naira gained 2.5% from the N1,593.9/$1 recorded on Thursday, the weakest rate since March 20 this year. This recent appreciation is the second this month, following the first recorded on May 3 and May 6, 2024.
93% Increase in Dollar Supply on the Official Market
The appreciation is likely due to a 93.31% rise in forex turnover, reaching $161.41 million from $83.5 million on Friday. This increase in market liquidity follows a significant drop in daily turnover between Thursday, May 16, and Friday, May 17, 2024, when turnover fell by 69.4%, the lowest since January 20, 2024. Monday’s trading dynamics confirmed the market’s erratic nature.
During intra-day trading, the exchange rate peaked at an intra-day high of N1,550/$1, indicating a temporary surge in dollar sales. Conversely, the intra-day low was N1,400/$1, reflecting periods of increased buying pressure on the naira. These sharp movements within a single trading day highlight the market’s uncertainty and instability, making it difficult for businesses and investors to plan their financial activities.
What You Should Know
Nigeria’s foreign exchange (FX) reserves increased by approximately $535 million over the past 28 days. Data from the Central Bank of Nigeria (CBN) shows a steady upward trend in reserves, reflecting the country’s resilience in maintaining financial stability amid challenging economic conditions.
The CBN reported that FX reserves rose from $32.107 billion on April 19, 2024, to $32.642 billion by May 16, 2024. This growth supports the naira and the economy. The apex bank recently activated plans to double foreign-currency remittance flows through formal channels by granting 14 new International Money Transfer Operators (IMTOs) Approval-in-Principle (AIP), according to the Bank’s Acting Director of Corporate Communications, Mrs. Hakama Sidi Ali.
Sidi Ali noted that increasing formal remittance flows will help stabilize Nigeria’s exchange rate, which has historically been volatile due to external factors like fluctuations in foreign investment and oil export proceeds. The CBN’s ongoing Monetary Policy Committee (MPC) meeting may significantly influence investor sentiment and attract more foreign exchange into the country as the apex bank works to curb inflation and FX volatility.
