NAIRA STAYS STABLE BASED ON FX MEASUREMENTS FROM CBN

Following N1,602.75/$1 on Friday, the naira rose to N1,572.86 per dollar on the official market on Monday, indicating a promising start to the FX market.

On the parallel market, the value of the country's currency closed at N1,590 per dollar on Monday, up from N1,605/$1 on Friday.

Several observers claim that the naira has stabilized more this week as a result of the Central Bank of Nigeria's policy measures.

Last week, the dollar on both official and underground markets, which added to the positive conclusion of the FX market.

FX market participants contributed $848.14 million, a 20.99 percent decrease from $1,073.50 million. Last week, the pressure on the value of the naira decreased as the nation's foreign reserves rose for a second straight month.

Jimi Ogbobine of Agusto Consulting stressed the importance of demand dynamics in the FX market in answer to questions. He enumerated the problems facing, addressing both immediate and long-term problems that have an impact on the market's supply side.

The Central Bank of Nigeria (CBN) has taken a number of short- to medium-term palliative steps to improve market supplies in order to address these worries. Due to these steps, portfolio investors have been drawn to the market, especially foreign portfolio investors (FPIs), who are now able to participate in Open Market Operations.

Incentives for holding naira provided by the CBN to investors, which pressure on the FX market to resume flowing, stabilizing the market. Foreign direct investments (FDIs) will find the FX market more attractive in order to stabilize it. All may eventually come into play when the market, stabilize, he said.

The OMO market attracts investors due to its strong yields, with rates for FPIs and banks exceeding 25 percent. Similarly, interest rates on Treasury bills have been approximately 20 percent for the course of the 364-day issue. Despite this, the actual return is still far lower than 11 percent, with current inflation standing at 31.70 percent. Investors are optimistic about the CBN's future trajectory since they expect reduced inflation and higher interest rates. Ogbobine asserts that in order to lessen the pressure on the FX market, the CBN wants to discourage investors from selling their naira. This draw in foreign direct investment and make it easier, which will affect the dynamics of the FX supply.

In addition, local investors are finding that buying Treasury bills yields higher returns than betting against the naira.

Despite these changes, Ogbobine continued to be positive about the likelihood of FX stability.

“The CBN's deliberate attempt to stabilize the financial markets and encourage naira investments, with expected benefits for investor confidence and FX stability.”

Muda Yusuf, CEO of the Center for the Promotion of Private Enterprise, says it's too early to applaud anyone or anything. “We need to give it more time.” This one- or two-week data set does not allow us to conclusions. Although things have improved, they have not yet reached our standards. Thus, before we can start debating and planning for it, we need pattern for eight weeks. In addition to the market moving itself, we also need a system in place to guarantee that we have this stability. CBN data shows that foreign currency reserves increased by 3.62 percent, from $33.17 billion at the beginning of February to $34.37 billion on March 12, 2024.

The naira closed the day unchanged at 1,602.75/$, 0.39 percent stronger than 1,608.98/$1 on Thursday at the Nigerian Autonomous Foreign Exchange Market, according to daily trade statistics from the FMDQ.

Citing a report released by Afrinvest Securities Limited, the CBN's FX reserves grew by 0.9 percent week over week (w/w) to $34.4 billion (as of March 14). Meanwhile, during the NAFEM window by 37.4% w/w to $1.0 billion. “The Naira strengthened against the USD in both the official and black-market. While the naira gained 1.5 percent w/w against the USD to settle at N1,602.75/$1.00 at the official window, the pair concluded at 81,595.00/$1.00 in the parallel market, indicating a 31bps gain. All FX divisions of the market to follow a similar path this week.”