The naira in the last few days has been improving against the US dollar in all foreign exchange markets The sharp rise of the naira followed the introduction of a transparent trading system which curbed speculationABCON President Aminu Gwadabe is in an exclusive chat with Henzodaily.ng explained the naira’s good performance
Henzodaily.ng journalist Dave Ibemere has over a decade of business journalism experience with in-depth knowledge of the Nigerian economy, stocks, and general market trends.
The Nigerian naira has appreciated significantly against the US dollar, strengthening by over N200 from an exchange rate as high as N1,780 to N1,500 in the past week.
Nigerians have celebrated the naira’s strong performance, which has renewed hope for the Central Bank of Nigeria (CBN)’s exchange rate policy.
ABCON president believes that the CBN policy is working
Photo credit: Bloomberg/contributor
Source: Getty Images
Driving factors helping the naira
Speaking with Henzodaily.ng on the naira’s recent surge, Aminu Gwadabe, the president of the Association of Bureaux De Change Operators of Nigeria, lauded the government and the Central Bank of Nigeria (CBN) for their efforts.
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He, however, explained that the primary driver of the naira’s appreciation is the renewed confidence of portfolio investors in Nigeria’s economy.
According to Gwadabe, the oversubscription of various government-issued bonds has induced a massive inflow of dollars, boosting the country’s foreign exchange reserves and strengthening the naira.
He added that another critical factor was the launch of the CBN’s Electronic Foreign Exchange Management System (EFEMS).
He noted that the platform has introduced much-needed transparency to Nigeria’s foreign exchange market, curbing speculative activities, currency substitution, and frivolous dollar demands.
His words:
“First, it is a welcome development and wish to congratulate all Nigerians ,the Government and the central bank of Nigeria
The appreciation of the naira is as a result of the combination of many factors.
“The return of confidence of the portfolio investors on our various bonds issued and oversubscribed have induced massive supply of dollars into the economy that helped the recent fortune of the Nara.
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“Secondly, in the midst of this increasing inflows, the CBN launched its EFEMS platform that eliminated the obscured nature of trading in the official/interbank foreign exchange market.
“It helped to discourage certain illegal economic behaviors like speculation,currency substitution and frivolous demand.
“It is indeed a game changer for transparency, price discovery and accountability.”
He added that diaspora remittance inflows are rising, facilitated by financial technology platforms and International Money Transfer Service Operators (IMTOs).
This surge, he explained, has injected liquidity into the retail foreign exchange market, which has historically been volatile.
“The increasing higher receipt of Diaspora remittance inflows through the fin tech and the IMTSOs is another important contributory factor that injected liquidity in the retail end of the market where volatility is pervasive.
“Currently we are in a situation where supply outstrips demand and witnessing an inorganic appreciation of our local currency.
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“There is a complete Abscent of demand.”
CBN adjusts Customs exchange rate
In a related development, the Central Bank of Nigeria has decided to reduce the exchange rate for importers to clear goods.
The decision follows the strong performance of the naira in the official and unofficial FX markets.
With the following exchange rate, Nigerians will hope for cheaper imported goods.
Proofreading by James, Ojo Adakole, journalist and copy editor at Henzodaily.ng.
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Source: Henzodaily.ng