In a notable development, the Nigerian naira saw an appreciation on Friday, reaching N1,440 per dollar compared to N1,450 per dollar recorded on Thursday. Similarly, in the Nigerian Foreign Exchange Market (NAFEM), the naira demonstrated resilience by appreciating N1,435.53 per dollar, indicating a noteworthy increase of N26.37, according to data from FMDQ.
The indicative exchange rate for NAFEM, as revealed by FMDQ, declined from N1,461.9 per dollar on Thursday, marking a positive shift and underscoring the naira’s strengthened position.
Consequently, the gap between the official and parallel market exchange rates contracted to N4.47 per dollar on Friday, a significant reduction from N11.9 per dollar recorded on Thursday. This shift in the exchange rates comes in the wake of recent policy adjustments by the Central Bank of Nigeria (CBN).
On Wednesday, the CBN announced new limits on the amount of foreign currencies that banks can hold, expressing concerns about the growing forex exposures on their balance sheets amid the local currency’s depreciation against the U.S. dollar.
The central bank’s circular (TED/FEM/FPC/GEN/001/003) dated January 31, 2024, introduced a substantial modification in the regulations governing exchange rate quotes by International Money Transfer Operators (IMTOs). Previously constrained by a -2.5 percent to +2.5 percent limit around the previous day’s closing rate, IMTOs are now permitted to quote rates based on prevailing market rates at the Nigerian foreign exchange market. This shift aligns with the CBN’s commitment to liberalize the Nigerian foreign exchange market and is to be conducted on a willing seller, willing buyer basis.
The circular, signed by Hassan Mahmud, director of the trade and exchange department, supersedes the previous one issued on September 13, 2023 (TED/FEM/PUB/FPC/001/009). All authorized dealers, International Money Transfer Operators, and the general public are urged to take note of this development and ensure compliance with the revised regulations.
The CBN’s decision reflects an ongoing effort to adapt and enhance the dynamics of the Nigerian foreign exchange market, as stated in the circular. This adjustment appears to have positively influenced the naira’s performance, narrowing the exchange rate differentials and contributing to a more stable forex environment.