The Nigerian naira showed resilience in the parallel market while experiencing a third consecutive decline against the dollar at the official foreign exchange market on Wednesday.
According to data from the Financial Market Dealers Quote (FMDQ), the naira weakened to N1,499.76/$1, down from N1,498.95/$1. This marks the third consecutive dip in the official market. However, the naira gained in the black market, appreciating by N20 to trade at N1,585/$1, up from N1,605/$1.
Currency traders in Lagos attributed the movement to a combination of factors, including the Chinese New Year holiday and a reduction in dollar demand due to the Central Bank of Nigeria’s (CBN) announcement of a new foreign exchange code. The code is expected to regulate foreign exchange transactions, creating a more stable environment. Some traders also noted that those with large dollar reserves sold them off, anticipating reduced demand and potential fluctuations in the exchange rate.
In response to these changes, the CBN, under Governor Yemi Cardoso, has updated its guidelines for Bureau de Change (BDC) operations. The new rules outline clearer practices for BDCs, particularly for sourcing foreign currency and handling travel expenses for both business and personal purposes.
Additionally, the CBN has introduced a new automated foreign exchange transaction system, replacing the older over-the-counter method to increase market efficiency and ensure better oversight.
The updated guidelines also align with recent trends indicating an increase in dollar liquidity within Nigerian banks. Customers seeking Business Travel Allowance (BTA) and Personal Travel Allowance (PTA) are now seeing their requests fulfilled more frequently.
While global currency trends have been volatile, with the U.S. dollar index remaining high at 107.81 points, the recent domestic shifts suggest an easing of pressure on Nigeria’s forex market. Despite the challenges posed by global trade tensions, especially with the U.S. tariffs on countries like China, Nigerian forex traders are optimistic about the continued strengthening of the naira in the parallel market.
Economists have cautioned that the U.S. trade policies and potential tariffs may have inflationary impacts globally, which could influence the Federal Reserve’s future interest rate decisions. However, in the meantime, Nigeria’s ongoing efforts to stabilize its currency market appear to be bearing fruit, with improved liquidity and a more transparent forex environment.
