Naira gains 115 points in one month

…As ABCON highlight factors responsible for currency appreciation

The federal government and the Central Bank of Nigeria (CBN) on Wednesday recorded another milestone in their fight against foreign exchange speculators and hoarders, as the naira strengthened significantly to close at 405 per US dollar against 520 it traded a month ago on the parallel market.

But in a response to an enquiry by our correspondent, Association of Bureau de Change Operators of Nigeria (ABCON) highlighted number of factors that is responsible for the appreciation of the currency.

The president of the association, Aminu Gwadabe, said that the BDCs in its 2017 outlook came out with a uniformed price of N400 to a dollar in the markets. “We created the needed awareness for the CBN forex policy to be effective.”

Commenting on the factors responsible for the significant gain at the parallel market, Gwadabe noted that elimination or reduced to the barest minimum frivolous demand in the foreign exchange market as a result of the CBN sustained intervention.

He added that stronger foreign reserves and fiscal buffers as a result of increase in crude prices and outputs and the price of the crude is $14 per barrel above the benchmark.

Also, increasing level of investors ‘confidence as the case of $57billion world bank investment to sub saharan African countries, is another factor that has helped in the recent gain of the local currency at the black market.

However, the closing rate of the local currency yesterday showed a total gain of 110 points, compared to the black market rate of 520 it exchanged in February.

The naira closing rate of 307.75 at the official foreign exchange market on Wednesday indicated that a drop N 2.75 as against 305 it exchanged in February.

Although, forex traders believed that the incessant intervention on the foreign exchange market by apex bank has weakened the naira at the forex after the central bank boosted the market with $1.5 million, which they said was part of its efforts to narrow the spread with the black market rate.

The naira on Monday settled at 435 to a dollar but appreciated further on Tuesday to close at 430 and strengthened by 20 points on Wednesday to record highest gain in seven month.

The central bank has been selling dollars at 305 levels since August to support the Nigerian currency. However, it devalued the naira last month for individuals, paving the way for a possible broader move to narrow black market rates.

“This development is largely accountable as a result of the sustained intervention in the interbank market and granting of more access to BDCs at the Money Transfers Operators (IMTSO) window by the CBN”, Gwadabe has said.