The exchange rate closed the week with a mixed performance, as the naira recorded a slight depreciation in the official market but strengthened on the parallel (black) market.
According to data published on the Central Bank of Nigeria (CBN) website, the official rate ended at N1,532/$1 on Friday, slightly depreciating from Thursday’s N1,531/$1.
The currency started the week at N1,529.5/$1 on Monday before weakening to N1,530/$1 on Tuesday.
At mid-week on Wednesday, it appreciated to N1,520/$1.
The week-on-week performance in the official market showed a slight depreciation of the naira, as it closed at N1,532/$1 this week, compared to N1,528.5/$1 last week.
In the parallel market, the naira appreciated, closing at N1,550/$1 on Friday—up from N1,555/$1 on Thursday. From Monday to Wednesday, the currency remained stable at N1,560/$1, according to Nairametrics’ market surveillance in Lagos.
Overall, the week-on-week performance in the parallel market showed an improvement, with the naira strengthening from last week’s closing rate of N1,580/$1 to N1,550/$1 this week.
Foreign reserves rise to $37.3 billion
According to the latest data from the CBN website, foreign reserves rose during the week to $37.3 billion on Wednesday. This was an increase from $37.28 billion on Tuesday and a further increase from Monday’s $37.127 billion.
Analysts attribute this to the striking of the US dollar in recent months.
Speaking with Nairametrics on Friday, Dr. Nasir Aminu, a Senior Lecturer in Economics and Finance and a Senior Fellow of Advanced Higher Education at the Cardiff Metropolitan University, said, “The naira hasn’t been volatile in the last few months. And there is a reason behind that, which is that America’s dollar has been shrinking. It shrunk this year by about 15% which tells you what you should know about Nigeria’s currency also.”
Nairametrics also understands that another major factor for the recent strengthening of the naira is due to a massive drop in demand for the dollar as more businesses switch to local inputs, relying less on importation.
Multiple sources in some of Nigeria’s banks who spoke to Nairametrics also cited a surge in dollar liquidity within the banking system as a major driver for the gains. “There is hardly any bank branch that you go to that you will not see dollars to collect if you wanted to buy,” one source stated.
What you should know
Recently, Bureau De Change (BDC) operators under the aegis of the Association of Bureau De Change Operators of Nigeria (ABCON) have hinted at the possibility of mergers, acquisitions, and takeovers by their members to meet the new capital requirement set by the CBN as part of measures to sanitise the forex market.
In May 2024, the CBN increased the minimum share capital of Bureau De Change Operators to N2 billion for Tier 1 license and N500 million for Tier 2 license, as against the previous threshold of N35 million for a general license.
