Naira Appreciates as Exchange Rate Gap Narrows

The naira was strengthened to 1,494.03/$ at the official window on Thursday, according to data from FMDQ Securities Exchange Limited. Similarly, an appreciation to 1,510.00/$ was recorded in the parallel market, reducing the spread between the two markets to 15.5/$.

The gap between the official and parallel foreign exchange rates has been narrowing due to various policies implemented by the Central Bank of Nigeria (CBN). According to CardinalStone Research’s daily market report, a 1.04 per cent appreciation was observed at the official window, bringing the rate to 1,494.03/$. In the parallel market, a 1.66 per cent increase led to an exchange rate of 1,510.00/$.

The upward trend of the naira had been maintained from the previous day’s trading. On the FMDQ platform, a 0.05 per cent increase was recorded, bringing the exchange rate to 1,509.53/$. Meanwhile, the parallel market rate appreciated by 0.65 per cent, reaching N1,535.00/$.

The recent directive by the CBN, extending dollar sales to Bureau De Change (BDC) operators until May 30, 2025, has been identified as a significant factor in the naira’s appreciation. Earlier, the President of the Association of Bureau De Change Operators, Aminu Gwadebe, had expressed optimism regarding the strengthening naira.

He noted that the interbank proceeds allocated to BDCs, as directed by the CBN, were injecting liquidity and reducing market panic.

Meanwhile, the appreciation of the naira coincided with the Monetary Policy Committee’s (MPC) decision to maintain the benchmark rate at 27.50 per cent, along with other key parameters. The asymmetric corridor around the MPR was retained at plus 500 minus 100 basis points, while the cash reserve ratio for deposit money banks and merchant banks was kept at 50 per cent and 16 per cent, respectively. The liquidity ratio remained at 30 per cent.

On the decision to hold rates, the Governor of the CBN, Olayemi Cardoso, stated after the MPC meeting that stability had been observed in the foreign exchange market.

During the meeting, the MPC acknowledged recent macroeconomic developments expected to positively impact price stability in the near to medium term. The stability of the foreign exchange market and the resulting appreciation of the naira were highlighted.

The committee emphasized the benefits of improvements in the external sector, particularly the convergence of exchange rates between the Nigeria Foreign Exchange Market and Bureau De Change operators. The CBN was urged to continue efforts to enhance market liquidity.

Additionally, recent measures introduced by the CBN, such as the Electronic Foreign Exchange Matching System (B-Match) and the Nigeria Foreign Exchange Code, were acknowledged for fostering transparency, ethics, and credibility in the market. The MPC expressed confidence that with these policy measures, an increase in foreign direct and portfolio investments, along with diaspora remittances, would be expected as investor and stakeholder confidence improves.