The Nigerian Naira experienced a notable appreciation against the US Dollar in the official foreign exchange (FX) market on Monday, registering a 0.58 percent gain.
The naira strengthened, with the dollar quoted at N1,617.96, compared to N1,627.40 on Friday, according to data from the FMDQ Securities.
This increase in the value of the naira followed a prediction by analysts, who anticipated a stronger demand for the local currency after the Central Bank of Nigeria’s decision to raise the Monetary Policy Rate (MPR). The hike was significant, with a 400 basis point increase, bringing the MPR to 22.75 percent from the previous 18.75 percent.
The decision to adjust the MPR was taken during the Monetary Policy Committee (MPC) meeting held last week. Along with the MPR adjustment, the MPC also altered the asymmetric corridor around the MPR to +100/-700 basis points from the previous +100/-300, increased the Cash Reserve Ratio from 32.5 percent to 45.0 percent, and maintained the Liquidity Ratio at 30 percent.
In Monday’s FX market trading, the intraday high for the dollar rose to N1,650, a slight decrease from Friday’s quote of N1,640/$1. Conversely, the intraday low depreciated to N1,511 per dollar, compared to N1,413/1 traded on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
There was a significant drop in the dollar supply, with a 67.56 percent decrease to $96.13 million on Monday from $296.35 million on Friday.
In the parallel (black) market, the naira was traded around N1,610 to N1,620 on Monday, maintaining a similar level to that of Friday. The gap between the official and parallel market rates has narrowed down to just N1, with the official rate at N1,617 and the black market rate averaging at N1,618.
Nigeria’s external reserves, a key factor in the Central Bank of Nigeria’s ability to stabilize the naira, have seen a 2.83 percent increase year-to-date. This growth is attributed to inflows from foreign capital and remittances.
As of March 7, 2024, the country’s foreign currency reserves stood at $34.11 billion, up from $33.17 billion at the start of the year. These reserves typically consist of various foreign currencies, gold, and other international assets, crucial for the country’s economic stability.
