Naira Strengthens Against the Dollar: A Detailed Overview of Forex Trends and Market Dynamics

Naira’s Triumph: A Strong Close at N844.85/$1

On Tuesday, December 19, 2023, the Naira demonstrated further strength against the dollar, closing at N844.85/$1 in the official market, marking a 5.15% appreciation. The NAFEM data revealed a closure at N888.35/$1, reflecting a N43.5 gain or a 5.15% increase compared to Monday’s close.

Throughout the day, the Naira experienced a broad trading range, reaching an intraday high of N1189.12/$1 and a low of N720/$1, representing a substantial spread of N469.12/$1. Forex turnover at the close stood at $111.76 million, depicting an 18.91% decrease from the previous day.

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Parallel Market Dynamics: Marginal Drop and Peer-to-Peer Quotations

In contrast, the parallel forex market saw a marginal drop in the Naira, with an exchange rate appreciation of 0.40%, quoting at N1240/$1. Peer-to-peer traders quoted around N1197.60/$1.

The Central Bank of Nigeria (CBN) confirmed tranche payments to 31 banks to clear the backlog of foreign exchange forward obligations. The apex bank has also established foreign exchange frameworks to address FX challenges.

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Insights from Economic Experts: Stability, Confidence, and Challenges

Economists, including Olatunde Amolegbe, former President of CIS, highlighted the importance of market and participant confidence for exchange rate stability. He emphasized the positive impact of clearing FX commitments on market confidence, anticipating medium-term effects. Bismarck Rewane, MD/CEO of Financial Derivatives Company Limited, noted lingering forex supply concerns, predicting continued naira volatility due to a shortage of dollars and speculative buying trends.

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Source: Nairametrics