The Nigerian Naira saw a modest appreciation against the US dollar on Wednesday, climbing to N1,609 from N1,615.94 the previous day, marking a 0.37% increase.
This uptick follows a series of foreign exchange directives issued by the Central Bank of Nigeria (CBN) in recent weeks.
Economist Comment As Naira Appreciates At Official Market
Commenting on the development, an economist at Lagos Business School, Mr. Adeoye Oladele, remarked, “The marginal rise in the value of the naira against the dollar is a positive sign, albeit small. It suggests that the measures taken by the CBN are beginning to have some impact on stabilizing the currency.”
The CBN’s actions include a significant adjustment in the Monetary Policy Rate (MPR), which surged by 400 basis points to 22.75%. Additionally, the CBN revised the asymmetric corridor around the MPR and increased the Cash Reserve Ratio while retaining the Liquidity Ratio.
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How CBN Intervention Leads To Niara Appreciation
Despite these interventions, the naira’s performance hasn’t fully reflected the impact of the rate hike, as evidenced by a recent 2.04% depreciation against the dollar. However, government officials remain optimistic, asserting that the naira is currently undervalued.
At the parallel market, the volatility of the naira persists, with fluctuating exchange rates throughout the day. Currency operators report rapid changes, with rates shifting multiple times within short periods. This unpredictability has led to challenges in determining the actual price of the dollar, contributing to market uncertainty.
BDC Operators On Why There is Instability In the Exchange Rate
Malam Ibrahim, a Bureau De Change (BDC) operator, explained, “The naira is just a pendulum right now, up and down. We are witnessing a situation where sellers outnumber buyers, exacerbating the currency’s instability.”
Meanwhile, the promise of dollar allocations to BDCs by the CBN remains unfulfilled, causing further uncertainty in the market. Over 1300 BDCs are awaiting allocations, as outlined in a recent CBN circular. The delay in disbursing these allocations adds to the challenges faced by currency traders.
In light of these developments, stakeholders emphasized the need for sustained efforts to stabilize the currency and restore confidence in the foreign exchange market. The effectiveness of the CBN’s measures will continue to be closely monitored as Nigeria strives to achieve currency stability amidst economic uncertainties.
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