Why the naira is rising as CBN predicts new exchange rates

• The Nigerian currency, the naira, has continued to gain against the US dollar in all the segments of the FX markets
• The naira has gained for three straight days from N1,609 per dollar to N1,593.57 as of Thursday, August 8, 2024
• The development comes after the Central Bank of Nigeria (CBN) sold dollars via the Retail Auction System (rDAS)

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment and the economy for over a decade.

The Central Bank of Nigeria pegged the exchange rate sold to authorised dealer banks on Wednesday, August 7, 2024, at N1,1495 per dollar.

The apex bank sold $876.26 million to authorised dealers via the Retail Dutch Auction System (rDAS) to reduce the system's FX demands.

The Nigerian currency recovers massively against the US dollar in all markets Credit: Bloomberg/Contributor
Source: Getty Images

CBN’s policy increases the naira’s value

The move yielded massive results, leading to the naira's recovery in the official market.

Data from the FMDQ Exchange shows that the Nigerian currency gained further in the official market on Thursday, trading at N1,593.62 compared to N1,596.52 quoted the previous day,

The dollar supplied by willing buyers and willing sellers rose by 51.18% to $141.99 million on Thursday, August 8, 2024, from the $93.92 million recorded the previous day.

The spot rate at the official market recorded an intraday high of N1,616 per dollar on Thursday, compared to N1,628 the previous day, while the intraday low closed at N1,520 per dollar, the rate as the last day.

Naira gains in the parallel market

The naira also gained in the parallel or black market on Thursday, August 8, 2024, following the dollar's crash at N1,595. This represented a 0.94% % gain from the N1,610 per dollar quoted the previous day.

According to reports, the Nigerian currency gained about N25 against the dollar or 1.5% compared to the N1,620 it sold on Wednesday, August 8, 2024, in the black market.

Analysts believe the recently ended rDAS reintroduced by the CBN is a masterstroke that could stabilise the forex market.

Analysts urge consistent efforts as reserves rise

They urged the bank to sustain the momentum to prop up the naira’s value against major global currencies.

Janet Ogochukwu, a senior banker and financial analyst, believes that the recent auction by CBN is the reason for the local currency's continuous gain.

She urged the bank to continue this unusual intervention to stabilise the forex market.

“The rDAS was a game-changer in the FX market; if sustained, it could bring stability.“As you can see, the official and the parallel markets are aligning finally to achieve the government's goals of unifying the rates.”

Meanwhile, Nigeria’s foreign reserves have risen to a two-month high at $36.867 billion.

Findings by Legit.ng show that the movement in the country’s reserves indicates a jump from $36.5 billion recorded on June 10, 2024, to the current figure as of August 9, 2024. 

Banks, traders crash dollar rate in official, black markets

Legit.ng earlier reported that the Nigerian currency, the naira, recorded an impressive performance against the US dollar for the first time in two weeks.

The naira appreciated against the dollar in the Nigerian foreign exchange market on Thursday, August 1, 2024, to trade at N1,570 per dollar, representing a 2.47% increase from the previous day’s gain of N1,698.73 per dollar.

The naira's current performance is the first since July 24, 2024, when the Central Bank of Nigeria sold Forex to 29 authorised dealers.

Source: Legit.ng