Exchange rate trades for intra-day high N791/$1 at official market
Forex turnover hits $242.60 million as Naira gains marginally to N1,082.32/$1 in official market
The Naira saw a minor advance vs the dollar at the official market on Wednesday, January 10, 2024, going above the N1,000/threshold. As a result, the Forex turnover increased by 148.95% to $242.60 million.
Data from the NAFEM, the official forex trading market, show that at the close of business, the local currency appreciated by 0.66% to settle at N1082.32 versus the US dollar.
The local currency gained N7.19 against the close of N1089.51 the day before, indicating a 0.66% strengthening. There was a spread of N570/$1, with the intraday high being N1270.65/$1 and the intraday low being N700/$1.
Improved liquidity and more dollar supply in the market—likely as a result of foreign inflows—had an impact on the Naira’s performance. As a result, the local currency’s exchange rate improved. The Naira’s strength was further aided by the Central Bank of Nigeria’s participation in the foreign exchange market. All things considered, the appreciation of the Naira is indicative of optimism and growing faith in the Nigerian economy.
The forex turnover at the close of trade, according to data from the official NAFEM window, was $242.60 million, a noteworthy increase of 148.95% over the day before. Additionally, the unofficial parallel currency market saw a minor strengthening of the naira, with the reported exchange rate of N1240/$1, up 0.40% from the closing rate of the previous day. Peer-to-peer traders also provided an exchange rate of roughly N1252.60/$1.
The Central Bank of Nigeria (CBN) confirmed that the official exchange rate stayed steady at N410.25/$1. The euro was traded at N1550/€1, and the British pound sterling was valued at N1720/£1 on the black market. The foreign exchange market witnessed a surge in activity and volatility overall, and the naira demonstrated some degree of resilience against the major global currencies. This implies that market players are keeping a close eye on developments and modifying their positions as necessary.
In an exclusive interview with Nairametrics, financial experts such as Mr. Olatunde Amolegbe, the Managing Director of Arthur Steven Asset Management Limited and the former President and Chairman of the Governing Council of the Chartered Institute of Stockbrokers (CIS), stressed the significance of market and participant confidence in preserving a stable exchange rate.
In order to increase market confidence, Mr. Amolegbe and other financial professionals emphasized the necessity of an open and trustworthy framework for monetary policy in addition to efficient fiscal measures. They also emphasized the significance of putting policies in place to draw in foreign direct investment and keeping a healthy foreign exchange reserve.
In order to boost investor confidence and support a stable currency rate, they also underlined the necessity of a stable political climate and sensible economic measures. Additionally, they proposed that the To lessen its reliance on oil exports and lessen the effect of outside shocks on the exchange rate, the government should concentrate on diversifying the economy.
The experts stressed the importance of participant and market confidence in preserving a stable exchange rate in their conclusion, and they advised policymakers to give priority to actions that would increase public trust in the financial system and the economy.
Building confidence is the key to drawing in international investment and keeping local capital coming in. In the absence of these elements, supply and demand are out of balance, which causes the instability we are currently seeing. Although clearing the FX commitment backs will give the market more confidence, its full effects might not be felt right now.It is critical that the government implement consistent and open policies to establish a stable and predictable business environment in addition to clearing FX commitments. This will stimulate investment and growth from local enterprises as well as draw in international capital. Additionally, fostering good governance, safeguarding property rights, and upholding the rule of law are crucial for gaining the trust of both domestic and foreign investors.
Additionally, spending money on technology, education, and infrastructure can boost the country’s attractiveness to investors. A highly trained labor force with a well-developed infrastructure can greatly increase productivity and ease of conducting business, increasing the nation’s competitiveness in the international market.
Last but not least, maintaining an open line of communication with investors and attending to their concerns will help keep investments in place. The government may show that it is dedicated to promoting economic stability and corporate expansion by actively interacting with stakeholders and acting upon their recommendations.
In conclusion, establishing trust via transparent policy frameworks, a steady business climate, the development of infrastructure, and open communication is critical to drawing in and keeping both domestic and foreign investment. The economy as a whole stands to gain from these initiatives by fostering a strong and long-lasting investment climate.
“In my opinion, reducing system liquidity through monetary policy tools may assist lessen currency speculation, but it is not a perfect answer. Managing Director/CEO of Financial Derivatives Company Limited Bismarck Rewane said, “There is a need for more concerted efforts to bring about structural changes that promote import substitution, such as enhancing security, improving infrastructure, attracting more foreign direct investments, and boosting local production.” He noted in a report that the naira is anticipated to continue fluctuating because of persistent worries about the supply of foreign exchange. Since more market participants are choosing to take long positions in the dollar and short positions in the naira, the scarcity of dollars is expected to fuel further speculative buying.
Rewane further underlined how crucial fiscal policy is to resolving the fundamental problems influencing the value of the naira. He recommended that the government concentrate on putting policies into place that support export-led growth and economic diversification in addition to lessening the nation’s reliance on imports. Furthermore, he suggested that steps be taken to streamline government procedures and lessen red tape in order to facilitate commercial dealings, increase foreign investment, and increase domestic output.
In conclusion, while monetary policy measures can somewhat reduce currency speculation, addressing the underlying problems affecting the naira’s stability will require a comprehensive strategy that includes structural reforms, changes to fiscal policy, and programs to increase local production and exports.
