Naira reaches a two-month high of N1,382 due to CBN’s FX reforms

Nigeria’s naira rose to a two-month high of N1,382.35 per dollar on Thursday at the official foreign exchange market helped by foreign exchange reforms by the Central Bank of Nigeria (CBN) that have helped boost investor confidence and dollar supply.

The last time the naira closed as strong as Thursday’s rate was on January 29, 2024 when the dollar was quoted at N1,348.63 at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to the data compiled from the FMDQ Securities Exchange.

After trading on Thursday, the naira strengthened by 7.98 percent compared to N1,492.61 quoted on Wednesday at the NAFEM.

At the parallel market however, the local currency depreciated by 1.98 percent as the dollar closed at N1,510 on the day as against N1,480 on Wednesday.

The Central Bank has introduced several policy reforms to improve liquidity in the FX markets in the short, medium, and long term.

Some of the reforms include unification of exchange rates window, liberalisation of FX market, clearing of FX backlog obligations to banks and airlines, introduction of Price Verification System (PVS), limits on banks Net Open Position, Lifting the daily cap of N2 billion on remunerable Standing Deposit Facility (SDF) and reform of the BDC segment.

Other measures include promotion of a willing buyer willing seller market; removal of all limits on margins for the International Money Transfer Operator (IMTO) remittances; introduction of a two-way quote system and the broad reforms in the Bureau De Change (BDC) segment of the market to restore stability, enhance transparency, boost supply, and promote price discovery in the Nigeria Autonomous Foreign Exchange Market.

Also, as part of efforts to rein in inflation and stabilise the naira, the Monetary Policy Committee (MPC) meeting, which held on February 26 and27, 2024, raised the MPR by 400 basis points to 22.75 from 18.75 per cent., adjusted the asymmetric corridor around the MPR to +100/-700 from +100/-300 basis points, raised the Cash Reserve Ratio from 32.5 percent to 45.0 per cent, and retain the Liquidity Ratio at 30 per cent.

Muhammad Sani Abdullahi, deputy governor, of the CBN, in charge of economic policy, said after the February 27 MPC, FX rates appreciated marginally by 0.33 percent on March 8, 2024 where it closed at N/US$1,625.23, compared with N/US$1,630.66 on Feb 27,2024.