On January 5, 2024, the Nigerian Naira experienced further gains against the US dollar in the official market, marking the second appreciation in the New Year. The official exchange rate at the Nigerian Autonomous Foreign Exchange Market (NAFEM) showed a 3% increase, with the Naira closing at N869.13 to a dollar. This represents a gain of N26.1 or a 3% rise compared to the previous day’s closing rate of N895.23.
However, at the parallel forex market where unofficial trading occurs, the Naira faced a decline. The exchange rate was quoted at N1255/$1, indicating a 1.99% drop from the previous day’s rate. Peer-to-peer traders quoted around N1231.70/$1.
Financial experts, including Olatunde Amolegbe, the former President and Chairman of the Chartered Institute of Stockbrokers, emphasized the importance of market and participant confidence for exchange rate stability. Amolegbe highlighted that efforts to clear FX commitment backlogs could positively impact market confidence in the medium term. He also stressed the need for structural changes, such as improved security, infrastructure, increased foreign direct investments, and encouragement of local production, to promote economic stability.
Bismarck Rewane, the Managing Director/CEO of Financial Derivatives Company Limited, noted in a report that the Naira is expected to remain volatile due to lingering forex supply concerns. The scarcity of the dollar may lead to continued speculative buying, with more market participants taking long positions on the dollar and shorting the Naira.
