The value of the naira, which closed the previous week at N1,502 to the dollar, experienced a surge in value to close last week Friday at N1,431.49 to the dollar.
In addition to the liquidity provided by clearing the backlog, inflows into the Nigeria Autonomous Foreign Exchange Market (NAFEM) also boosted liquidity.
Furthermore, the central bank intervened in the market three times within the week, with total sales of $195 million. Inflow at the official market improved by 47.2 percent week-on-week to $1.5 billion from the $1 billion inflow recorded the previous week.
Similarly, the value of the naira at the parallel market improved by 6.7 percent, selling at N1,495 to the dollar.
Consequently, in the forwards market, naira rates appreciated across various contracts, with the 1-month rate up by 9.6 percent to N1,460.81/USD, the 3-month rate up by 9.4 percent to N1,500.26, the 6-month rate up by 8.4 percent to N1,562.99, and the 1-year rate up by 6.5 percent to N1,705.82 to the dollar.
Analysts suggest that the CBN’s increased intervention in the foreign exchange market, including the payment of the last portion of the forex backlogs and the commencement of retail sales of dollars to banks within the range of N1,300 – N1,400 to the dollar, will boost confidence in the FX market and stabilize the naira.
While the CBN is expected to continue its forex intervention in the near term, analysts do not anticipate a substantial increase in forex liquidity due to the relatively weak forex reserves.
However, barring any notable shocks, reduced currency speculation and improved FPI (Foreign Portfolio Investment) inflows due to high naira yields may continue to strengthen the local currency in the near term.
