Naira Recovers Significantly Amid Low US Dollar Demand

Naira has recovered significantly amid low US dollar demand at the black market.

Truetells Nigeria reports that Nigeria’s official currency, the naira on Thursday appreciated on the black market, trading at N570 to the dollar. The local currency was stronger than N575 to dollar, it closed last week.

The naira exchanged at N410.81/$ at the Investors and Exporters (I&E) forex window, now the official market rate.

The gradual rebound of the naira followed drop in dollar demand at the parallel market where majority of Nigerians previously sourced the greenback.

In emailed note to investors, Forex Trading Desk Manager, AZA Finance, a global forex dealer, Murega Mungai, said the slight rebound of the naira followed a fall in demand for the greenback on the parallel market, with the CBN’s 30-day moving average Forex reserves increasing by 3.6 per cent over the past week to $37.6 billion.

“This week, Nigerian President Muhammadu Buhari sought approval from the National Assembly to raise the 2022 budget by N2.47 trillion to N16.45 trillion, reflecting new fiscal terms in the recently passed Petroleum Industry Act and other critical expenditures in the 2022 budget. We expect the more positive environment for the Naira to continue in the coming week,” Mungai said.

At the banks’ branches, dollar was selling at an official rate of N412 and that each traveller was entitled to buy $4,000 per quarter for personal travels and $5,000 per quarter for business travels.

Managing Director, Financial Derivatives Company Limited, Bismarck Rewane, said more dollar allocation is needed to get the naira back to position of strength.

For him, the necessary and sufficient condition for naira stability at the parallel market is a significant increase in forex supply at the official window rather than administrative solutions.

Rewane explained that a major determinant of the naira value is the balance of trade and current account. “The terms of trade improving and balance of trade deficit reducing but the naira is still languishing and plunging,” he stated.