The Naira continued its upward trajectory against the US dollar at the official foreign exchange market on Monday, reflecting a positive trend amid ongoing currency fluctuations in Nigeria.
According to data from the Financial Markets Dealers Quotation (FMDQ), the Naira appreciated by N3.21, closing at N1,570.99 per dollar. This represents a modest improvement from Friday’s rate of N1,574.20 per dollar.
This slight appreciation marks a continuation of the Naira’s gradual recovery in the official market, even as pressures on the currency remain high.
Meanwhile, in the parallel or black market, the exchange rate stayed unchanged at N1,600 per dollar, the same as it was last Friday, indicating a relative stability in the informal sector.
The Central Bank of Nigeria (CBN) has recently intensified efforts to stabilize the Naira through the introduction of a Dutch Auction System (rDAS) amid a surge in demand for foreign currency.
The apex bank’s move is part of a broader strategy to manage the volatility in the foreign exchange market, which has been exacerbated by rising demand and economic uncertainties.
On Friday, the CBN conducted a significant foreign exchange auction, selling a total of $815.26 million to 26 banks at a rate of N1,495 per dollar.
The auction was aimed at easing the pressure on the Naira and ensuring a more transparent price discovery process in the market.
However, the auction also highlighted the competitive nature of the foreign exchange market, as bids from six banks were disqualified for failing to meet the required criteria.
The black market, often referred to as the parallel market, has continued to operate outside the official channels, with rates typically higher than those offered by the CBN.
As of Sunday, August 11, 2024, the exchange rate in the Lagos Parallel Market was reported to be N1,603 per dollar for buying and N1,610 per dollar for selling, according to sources from Bureau De Change (BDC) operators.
The CBN, which does not officially recognize the parallel market, has repeatedly urged Nigerians to conduct their foreign exchange transactions through authorized banks.
Despite this, the parallel market remains a popular avenue for those seeking to exchange currency, due in part to its accessibility and less stringent requirements.
The CBN’s recent auction, conducted under the retail Dutch Auction System (rDAS), is part of its broader efforts to bring more stability to the foreign exchange market.
The auction method allows the CBN to allocate foreign currency to banks at a predetermined rate, which is intended to reduce speculative activities and align the market closer to the true value of the Naira.
In a statement issued by Omolara Omotunde Duke, the CBN’s Director of the Financial Markets Department, it was disclosed that the auction aimed to address the growing demand for foreign exchange and to promote better price discovery in the market.
The statement also revealed that while 26 banks successfully secured foreign exchange through the auction, six banks were disqualified—four for missing the submission deadline and two for providing incomplete bids.
The CBN’s intervention comes at a time when the Naira has been under significant pressure, both from domestic factors such as inflation and external factors like fluctuations in global oil prices.
Nigeria, as an oil-dependent economy, has faced challenges in maintaining a stable exchange rate due to its reliance on oil exports for foreign currency earnings.
With global oil prices experiencing volatility, the impact on the Naira has been profound, necessitating continued intervention by the CBN.
