Reasons Behind Naira’s Massive Appreciation Against the Dollar
The Nigerian Naira showed a strong performance on Friday, gaining value in both the official and black market foreign exchange rates.
Key Highlights:
- Official Market:
- The Naira improved to ₦1,535 per dollar on Friday, up from ₦1,567 per dollar on Thursday—a gain of ₦32.
- Data from FMDQ revealed that exchange rates ranged between ₦1,480 and ₦1,700.76 per dollar during Friday’s trading session.
- Black Market:
- The Naira appreciated significantly, trading at ₦1,600 per dollar on Friday, compared to ₦1,715 per dollar on Thursday—a jump of ₦115.
Why Did the Naira Strengthen?
The Central Bank of Nigeria (CBN)’s new Electronic Foreign Exchange Matching System (EFEMS) played a big role. This system, introduced on Monday, makes forex trading more transparent by matching buy and sell orders automatically and in real-time. It helps banks and other authorized dealers conduct transactions faster and with greater trust.
An anonymous insider explained that EFEMS revealed banks had a higher supply of dollars than expected before its launch, boosting market confidence.
Additional Factors:
- Foreign Portfolio Investors (FPIs) have been bringing in more dollars, drawn by the high returns on treasury bills, which reached record yields of 30.71% recently (though slightly dropped to 29.75%).
Future Outlook
Experts believe EFEMS could solve long-standing problems in Nigeria’s foreign exchange market by increasing dollar supply and transparency. This progress is expected to stabilize the Naira and improve Nigeria’s FX reserves.
