The Magic of March: Naira Gallops 21.8% Against US Dollar

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The Nigerian Naira  appreciated massively against the US dollar throughout March 2024, breaking a five- year record, and creating  ripples on the  exchange rate listing.

Official figures indicate that the Naira closed the month at N1309/$1 on the last trading day, up from N1595.11/$1 at the end of February 2024.

This 21.8% gain points to the success of several forex policies, strategies and interventions by the Central Bank of Nigeria (CBN) all aimed at stabilizing and strengthening the national currency.

In the parallel market, the Naira saw an even more pronounced recovery. The exchange rate improved from N1600/$1 in February to N1250/$1 in March, representing a 28% gain in one month highlighting the effectiveness of the measures taken to bridge the gap between the official and unofficial currency markets.

The gains in the official and parallel market are the largest seen in over 5 years. Before now, the exchange rate was fixed at about N450/$1 for almost two years and around N380/$1 between 2020 and early 2021.

On the official end of the market, the apex bank started by addressing suspected cases of excessive foreign currency speculation and hoarding from Nigerian banks.

In a circular titled “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks,” the CBN stated that banks’ Net Open Position (NOP) must not exceed 20% short (owning more than owed) or 0% long (owning no more than the bank’s shareholder funds not reduced by losses) of the bank’s shareholders’ funds.

Experts suggest this removed a huge area of speculation from the market, ensuring that only genuine demand for forex was being seen.

The apex bank also announced the complete clearance of the valid foreign exchange backlog. They stated that they concluded the payment of $1.5 billion to settle obligations to bank customers, effectively settling the residual balance of the FX backlog.

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