On Tuesday, December 19, 2023, the Nigerian naira demonstrated further strength against the US dollar, closing at N844.85/$1 at the official market. This marks a significant appreciation of 5.15%, as the domestic currency closed at N888.35/$1 on Monday, December 18, 2023, according to data from the NAFEM (Nigeria Autonomous Foreign Exchange Market), where forex is officially traded.
The intraday high recorded during the trading session was N1189.12/$1, with an intraday low of N720/$1, indicating a substantial spread of N469.12/$1. Forex turnover at the close of trading stood at $111.76 million, reflecting an 18.91% decrease compared to the previous day.
Meanwhile, at the parallel forex market where forex is sold unofficially, the naira experienced a marginal drop, appreciating by 0.40%. The exchange rate was quoted at N1240/$1, while peer-to-peer traders quoted around N1197.60/$1.
The Central Bank of Nigeria (CBN) has undertaken tranche payments to 31 banks to clear the backlog of foreign exchange forward obligations. Additionally, the CBN has implemented foreign exchange frameworks to address the challenges in the forex market.
Economists weigh in on the situation, emphasizing the importance of market and participant confidence for exchange rate stability. Mr. Olatunde Amolegbe, former President and Chairman of the Chartered Institute of Stockbrokers (CIS), highlighted the need for deliberate efforts to effect structural changes, encouraging import substitution through improved security, better infrastructure, increased foreign direct investments, and support for local production.
Bismarck Rewane, Managing Director/CEO of Financial Derivatives Company Limited, noted that the naira is expected to remain volatile due to lingering concerns about forex supply. The scarcity of dollars has led to speculative buying, with more market participants opting for long positions on the dollar while shorting the naira.
