Naira Rebounds, Ranks Among Best-performing African Currencies

• A new report has ranked the naira on the list of the best-performing currency in the continent
• According to investment firm Afrinvest, the naira's value has increased by 21.4% since March, making it one of the best performers
• The local currency last closed at N1,255.07/$1 at the Nigerian Autonomous Foreign Exchange Market window

Legit.ng journalist Zainab Iwayemi has over three years of experience covering the Economy, Technology, and Capital Market.

African markets.com, a regional research hub, has named the naira the third best-performing currency on the continent.

This is as the Central Bank of Nigeria (CBN)'s determined efforts have caused the naira to rise from its lowest level this year.

Increasing interest rates and selling dollars straight to foreign currency markets are two examples of these moves.

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Based on information from the FMDQ's website, the naira has risen significantly lately, indicating a notable comeback from its February decline past N1,500.

At the end of trading on Thursday, April 4, it gained even more, closing at N1,255.07/$1 at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window. However, at the parallel market, it closed at N1,260/$1.

Naira among top gainers

According to investment firm Afrinvest, the naira's value has increased by 21.4% since March, making it one of Africa's most outstanding performers at this time.

The dollar was up 301.01% in Zimbabwe, the Egyptian pound was up 52.93%, and the Nigerian naira was up 41.17% year-to-date. Nigeria has seen a sharp increase in foreign investment from $1.6 billion in 2023 to $2.1 billion this year.

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No more N1,251: Naira gains as CBN quotes new rate to sell dollar to BDCs

Similarly, foreign portfolio investments (FPIs) on the Nigerian Exchange Limited (NGX) increased by 23.95% to N65.81 billion from N53.11 billion reported in January, according to the NGX's domestic and international portfolio investment report for February 2024.

Recent policies driving growth

This turnaround has been fueled by a shift in economic policy under President Bola Tinubu from set to market-driven exchange rates, according to a Daily Sun report.

The exchange rate increased after the president's inauguration in May 2023, rising from roughly N755 to over N1,000 by the end of the year.

This caused the naira to devalue by 55%, making it the currency with the poorest performance globally after the Lebanese pound and the Argentine Peso.

Nonetheless, the CBN has implemented reforms, including a policy whereby it sells $20,000 per week to Bureau De Change (BDC) operators at a fixed price; cleared $2.4 billion in foreign exchange claims; raised the yield on assets denominated in naira; reduced currency speculation; raised interest rates twice; and increased dollar allocations to banks, with the requirement that foreign banks maintain a minimum capital of N500 billion.

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The CBN's tough approach, including raids on cryptocurrency exchanges like Binance, has also contributed to the currency's stabilisation.

However, safeguarding the naira has put pressure on Nigeria's foreign exchange reserves, which are essential for paying off treasury bills and debts.

While expressing trust in the CBN, Financial Derivatives and Goldman Sachs' analysts forecast that the naira may reach N1,200/$1 in less than a year.

Analysts, however, opine that this is subjective and can be based on certain assumptions and expectations.

Charles Abuede, a financial analyst, said:

"I think the onus lies on the monetary and fiscal authorities to put in place friendly policies to aid the management of the fx market."

Naira gains as CBN quotes new rate

Legit.ng reported that Bureau de Change (BDC) operators have explained the rationale behind the consistent rise in the local currency.

They attributed this to the cheap dollar members get from the Central Bank of Nigeria.

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Naira makes biggest gain in months in official window, trades stronger in black market

This occurred as the naira continued its upward trend against the US dollar on Wednesday, strengthening at both the official foreign exchange and black market markets.

Source: Legit.ng