Naira Strengthens Against Dollar on I&E Window, Weakens on Black Market

The Nigerian naira appreciated against the US dollar on the Investors and Exporters (I&E) window on Wednesday, extending its gains for the second consecutive day.

According to data from the FMDQ securities exchange, the official platform for trading foreign currencies, the naira closed at N763.00 per dollar on Wednesday, gaining N5.17 (0.67%) from N768.17 per dollar on Tuesday.

The naira opened at N760.50 per dollar on Wednesday and recorded an intraday low of N841.00 and a high of N467.00 before settling at N763.00 per dollar.

The Wednesday rate represents a 0.9% appreciation from N770.17 per dollar on Friday last week, when the naira closed on a negative note.

The foreign exchange turnover in the I&E window increased significantly by 23.98% ($245.65 million) from $198.13 million recorded on Monday.

However, the naira depreciated against the dollar at the parallel market, also known as the black market, where most Nigerians buy and sell foreign currencies.

According to Bureau De Change (BDC) operators, the naira traded between N770 and N776 per dollar across different states in Nigeria, including the Federal Capital Territory, on Wednesday.

The naira lost 0.39% at the parallel market due to increased demand for dollars from travelers, students and businesses.

The naira’s depreciation comes amid Nigeria’s adoption of a market-driven exchange rate policy two weeks ago, which led to a sharp drop in the value of the local currency from N471 per dollar to over N700 per dollar.

The policy was approved by the federal government through the Joint Tax Board (JTB) and is expected to enhance the security, planning and accountability of the country’s transportation system.

The exchange rate has fluctuated between N750 and N770 per dollar in the last seven days, hitting an intraday high of N840 on Tuesday.

The Central Bank of Nigeria (CBN) has said that it will continue to intervene in the foreign exchange market to ensure stability and liquidity.

However, some analysts have argued that Nigeria needs to target an exchange rate of between 500 and 600 naira per dollar, which requires reserves of up to $60 billion and a doubling of exports to support growth ambitions.

The naira’s exchange rate is a key indicator of Nigeria’s economic health, as Africa’s largest oil producer relies heavily on foreign exchange earnings from crude exports.

A weaker naira makes imports more expensive and fuels inflation, which hit a four-year high of 18.12% in April. It also affects the government’s revenue and debt servicing costs, as well as investors’ confidence and capital flows.

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