The Nigerian naira recorded a significant appreciation against the US dollar at the Investors and Exporters (I&E) window on Monday, July 31, 2023. The naira closed at N756.94 to the dollar, representing a 2.43 per cent increase from N775.76 on July 28, 2023.
The I&E window is a foreign exchange market where buyers and sellers of foreign currency can trade freely based on market forces. It was introduced by the Central Bank of Nigeria (CBN) in April 2017 to improve liquidity and transparency in the forex market.
According to data from FMDQ Securities Exchange, the open indicative rate for the I&E window was N784.91 to the dollar on Monday, while the highest rate recorded within the day’s trading was N830 to the dollar. The lowest rate recorded was N651 to the dollar.
The total turnover for the I&E window on Monday was $67.21 million, which was lower than the $72.32 million recorded on July 28, 2023.
The naira’s appreciation at the I&E window could be attributed to the CBN’s interventions in the forex market, as well as the increase in oil prices and foreign inflows.
The CBN has been injecting dollars into the forex market to meet the demand of importers and other end-users, as well as to support the naira’s stability. The apex bank has also been selling dollars to bureaux de change (BDC) operators at a fixed rate of N393 to the dollar.
Oil prices have been rising in recent weeks due to the recovery in global demand and supply disruptions caused by geopolitical tensions. Nigeria, as an oil-exporting country, benefits from higher oil prices as it boosts its foreign exchange earnings and reserves.
Foreign inflows into Nigeria have also increased in recent months, as investors seek higher returns from emerging markets amid low interest rates in developed countries. Nigeria’s bond market has attracted foreign investors who are looking for attractive yields and exchange rate stability.
The naira’s performance at the I&E window is expected to influence the parallel market, where the naira trades at a premium to the official rate. The parallel market rate reflects the true value of the naira based on demand and supply forces.
The naira traded at N820 to the dollar at the parallel market on Monday, according to AbokiFX, a website that tracks forex rates in Nigeria. This was slightly lower than N822 to the dollar on July 28, 2023.
The naira’s exchange rate is one of the key indicators of Nigeria’s economic health, as it affects inflation, trade, investment, and growth. A stable and strong naira is desirable for both businesses and consumers in Nigeria.
Meanwhile, the appreciation of the naira is likely due to a number of factors, including:
- Increased oil production, which has boosted foreign exchange earnings.
- Lower demand for dollars from importers, as the cost of imports has increased.
- Increased confidence in the Nigerian economy, as evidenced by the recent upgrade of Nigeria’s credit rating by Fitch Ratings.
The appreciation of the naira is a positive development for the Nigerian economy. It will make it cheaper for businesses to import goods and services, which will help to lower inflation. It will also make it easier for Nigerians to travel abroad.
However, it is important to note that the naira is still volatile, and it is possible that it could depreciate in the future. Investors should monitor the situation closely.
