Naira Gains N125/dollar After CBN Launches Platform for Forex Trading
- One month following the introduction of the EFEMS, Nigerian currency has increased by N125 to the US dollar
- Analysts note that the local currency will have a strong run in 2025 and speculate that this could be a sign of naira's recovery
- December 2, 2024, marked the launch of this system, which was created for authorized traders in the Nigerian Foreign Exchange Market
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Legit.ng journalist Zainab Iwayemi has 5-year-experience covering the Economy, Technology, and Capital Market.
Nigeria’s currency has appreciated by N125 to a dollar one month after the launch of the Electronic Foreign Exchange Matching System (EFEMS).
Source: Getty Images
Analysts say this may be an indication that the naira’s rebound journey has just started, noting that the local currency will have a positive run in 2025.
According to the Central Bank of Nigeria (CBN), the naira strengthened by 8% as the dollar was quoted at N1,535 on January 3, 2025, as against N1,660 traded on December 2, 2024, the official launch date of EFEMS trading, indicating a N125 gain over the period.
The introduction of EFEMS was first announced by the CBN on October 3, 2024, as part of a series of reforms aimed at addressing speculation and enhancing transparency in Nigeria’s foreign exchange market.
This system was specifically designed for authorised dealers operating within the Nigerian Foreign Exchange Market (NFEM) and became operational on December 2, 2024, after a successful two-week trial period conducted in November 2024.
What analysts say
Ayodele Akinwunmi, who serves as a senior relationship manager at FSDH Merchant Bank, attributed the recent improvements in the foreign exchange market to the CBN’s latest policy measures.
He emphasised in a BusinessDay report that these policies have significantly enhanced both the supply of foreign exchange and the transparency of market operations.
According to him, customers are now able to access foreign exchange more readily to meet their financial obligations, and the prevailing exchange rates are better aligned with market realities.
Akinwunmi also highlighted how seasonal factors, particularly the typically lower demand for dollars during the Christmas holiday period, have played a role in bolstering the naira’s value during this time.
Similarly, Aminu Gwadabe, president of the Association of Bureaux De Change Operators of Nigeria (ABCON), underscored the critical role of the CBN’s interventions in the EFEMS in influencing the naira’s appreciation.
He emphasised the need to further enhance liquidity in the retail foreign exchange market, particularly through the involvement of Bureaux De Change (BDCs).
Gwadabe proposed that BDCs be utilised as strategic instruments to manage exchange rate volatility effectively and to help achieve the exchange rate targets set in the national budget. He expressed confidence that a more robust engagement of BDCs in the market could contribute to greater stability and predictability in exchange rates.
Challenges
While EFEMS has delivered promising results, industry experts stress that challenges remain.
Muda Yusuf, chief executive of the Centre for the Promotion of Private Enterprise (CPPE), acknowledged the CBN’s progress in stabilising the foreign exchange market but pointed out that the unregulated black market continues to pose significant hurdles.
“The measures taken by the CBN are yielding some positive results, but it is a work in progress,” Yusuf explained.
“Speculators and manipulators in the market are constantly devising new tricks, so this must be a continuous effort.”
Naira begins 2025 on positive note
Legit.ng reported that the Nigerian naira began the new year by gaining against the US dollar in the Electronic Foreign Exchange Market System (EFEMS).
The naira opened trading in EFEMS at N1,540 per dollar on Thursday, January 2, 2024, and closed at N1,538.23.
The local currency was battered in 2024 after the Nigerian government devalued it twice, leading to an over 40% depreciation.
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Source: Legit.ng
