Banks, Dealers Adjust Exchange Rates as Dollar Crashes in Official Window, FX Reserves Rise
- The Nigerian currency, the naira, experienced a turnaround in the official foreign exchange window on Thursday, October 24, 2024
- Amid the reported increase in Nigeria’s foreign reserves, the naira appreciated by almost N50 against the US dollar
- The local currency traded at N1,601 per dollar as against the N1,650 it traded the previous day
Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.
Amid the euphoria of Nigeria’s foreign reserves rising to $40.2 billion, the Nigerian naira has bounced back strong against the US dollar in the official window.
The naira, which has been down in the last three days, witnessed a resurgence, gaining almost N50 in the Nigerian Autonomous Foreign Exchange Market (NAFEM).
Source: Getty Images
The spot rate gap grows as the naira rises
Data from the FMDQ Exchange shows that the naira rose 3.20% to close at N1,601.20 per dollar on Thursday, October 24, 2024, up from the N1,650 it traded on Wednesday, October 23, 2024.
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Currency dealers quoted the dollar’s spot rate at a high of N1,696 per dollar and a low of N1,585.43, leaving a margin of N111.43.
The foreign exchange turnover in the official window also increased to $230.99 million on Thursday, October 24, 2024.
The naira depreciates in parallel market as reserves rise
However, on Wednesday, October 23, 2024, the naira depreciated massively in the parallel market to N1,739 per dollar.
Meanwhile, Nigeria’s foreign reserves rose to $40.2 billion in October 2024, up from $38 billion recorded in September.
The governor of the Central Bank of Nigeria (CBN), Olayemi Cardoso, disclosed this during an investors’ meeting in Washington, DC, on Wednesday, October 23, 2024.
FG explains why CBN does not intervene in naira
At the meeting, Nigeria’s minister of finance, Wale Edun, said the inflows were organic due to the government’s decision not to defend the naira.
The minister stressed the government’s commitment to maintaining transparency in the country’s FX reserves.
He reassured investors that the government is committed to regularly updating Nigeria’s reserve position.
According to reports, the minister explained that the decision to let the market determine the exchange rate for the naira rather than the Central Bank of Nigeria (CBN) defending it led to the organic growth in the nation’s reserves.
He said that by allowing the market to determine the exchange rate, the government is working to boost investor confidence and build cushion to stabilise the economy.
Reserves growth is organic
He disclosed that the government aims to improve its forex supply organically without CBN intervention, stating that the apex bank may still intervene in the market periodically.
However, he said the ultimate aim is to achieve a stable FX rate without relying on the CBN’s interventions.
The minister highlighted the positive impact of foreign portfolio investment on the economy.
Experts ask FG to stabilise the naira
The finance minister said Nigeria has witnessed improved investor confidence, with many ready to commit more resources to the Nigerian market.
Financial expert Janet Ogochukwu expressed hope for the continued rise of the Nigerian currency and the country's reserves. CBN should intensify efforts to close the widening gap between the official and parallel exchange rate windows.
"The gap is too broad, and it will continue to cause volatility in the market.
With the current rate, the margin is close to N200 per dollar, which defeats the Nigerian government's plan to unify the rates," she said.
CBN releases reporting channels for bank customers
Legit.ng earlier reported that as Nigerian banks migrate to more secure platforms to protect depositors’ funds, customers have asked financial institutions to compensate them for losses incurred during network downtime.
About four commercial banks in Nigeria issued notices of system upgrades in the past weeks, which has caused customers to have trouble carrying out transactions.
The banks’ tech upgrades in the past few weeks caused severe concerns to customers, sending panic into bank customers in rural areas.
Proofread by Kola Muhammed, journalist and copyeditor at Legit.ng
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