The Nigerian naira held its value against the US dollar in the black market, but it slightly declined in the official market amid a mixed bag of U.S. economic data.
In the parallel market, the value of the Naira increased late on Thursday from N1,105 per dollar on Wednesday to N1,060 against the U.S. dollar. Nonetheless, the value of the Naira decreased to N1,154.08 per dollar on the Nigerian Foreign Exchange Market or NAFEM.
The indicative exchange rate for NAFEM increased to N1,154.08 per dollar from N1,072.74 per dollar on Wednesday, according to data from FMDQ.
Boost in Nigeria’s FX market
The Nigerian Naira, earlier classified among the worst-performing currency in February, saw a 12 percent increase in value in April.
Goldman Sachs earlier projected that if the CBN keeps enforcing favorable monetary policies, the naira’s value strengthened below N1000 per dollar. The Tier1 American investment bank’s highlighted policies include additional steps to address the local dollar scarcity that fueled volatility and encouraged businesses to use the parallel market, as well as a cumulative interest rate hike of 600 basis points at policy meetings in February and March.
The CBN has recently implemented a number of policies aimed at promoting market transparency, controlling participant behavior, and stabilizing the foreign exchange market.
In March, the bank declared that it had paid up all “legitimate” foreign exchange arrears, primarily to boost confidence in the Nigerian economy.
Along with removing the NAFEX rate for International Money Transfer Organizations (IMTOs)’ plus or minus 2.5 percent, the CBN also released guidelines for IMTO services that included minimum capital requirements and timely repatriation of export revenues.
It also instructed all banks to review the Cash Reserve Ratio (CRR) framework and cease using foreign currency as collateral for Naira loans.
Consequently, the greenback maintained most of its momentum amid remarks made by New York Fed President John Williams, who stated that given the strength of the economy, there is no immediate need to lower interest rates.
The dollar index, which compares the strength of the greenback against six major global currencies traded around 106 index points, putting it within striking distance of this week’s 5-1/2-month high of 106.51, which was reached on Tuesday. Thus far this year, the index has increased by 4.5%.
Investors doubt if the United States central bank will cut rates soon due to persistent inflation and economic data. On the strength of fresh orders and finished goods shipments in the United States, the Mid-Atlantic region saw its largest expansion in the previous two years in April thus boosted demand for the haven currency in global markets.
There was however a decline in existing home sales in the United States in March partly due to rising interest rates and property prices. Last month, seasonally adjusted annual home sales fell 4.3% to 4.19 million units.
