Nigerian Naira Rebounds 9.8% as Senate Calls for Currency Stabilization Efforts

The Nigerian naira appreciated by 9.8% to N1,275 per US dollar over the weekend, breaking below the N1,300 resistance level at the parallel market. This recovery in the naira's value coincides with plans by the Association of Bureaux De Change Operators of Nigeria (ABCON) to unify the retail end of the foreign currency market, which is aimed at tackling volatility and boosting regulatory compliance.

The gain comes after a surge in demand for dollars in the parallel market driven by banks and end-users, combined with slow forex disbursement to Bureau De Change (BDC) operators by the Central Bank of Nigeria (CBN). The naira had previously lost 26.2% in two weeks, falling from N1,125 per dollar on April 12, 2024.

Currency traders in Abuja's Wuse Zone 4 market voiced apprehensions about the risks and uncertainties associated with trading the naira due to its instability, stressing the government's pivotal role in deciding whether to further increase the currency's value or consider devaluation to ensure market stability. The Economic and Financial Crimes Commission (EFCC) has also launched an offensive against currency traders and online platforms that manipulated the value of the naira, resulting in the arrest of 34 alleged currency speculators.

Why this matters: The instability and depreciation of the naira have significant implications for Nigeria's economy, affecting inflation, foreign investment, and the purchasing power of citizens. The Senate Finance Committee's call for concerted efforts to stabilize the currency highlights the urgency of addressing the issue to foster economic stability and growth.

The Nigerian Senate's Committee on Finance has called for coordinated efforts to address the instability and ongoing depreciation of the naira. The committee emphasized the pressing need for proactive measures to safeguard the stability and resilience of the Nigerian currency, pointing to the necessity to address root causes such as fluctuations in global oil prices, fiscal deficits, and structural imbalances in the economy.

The CBN has sold around 60 million dollars to BDC operators over the last two months since it resumed dollar sales to them this year. Despite a robust supply of over $17 billion in the Foreign Exchange (FX) market, which helped to shore up the naira to a little above N1,000 this year, the local currency has begun to fall faster recently. This weakening is attributed to renewed assault, notwithstanding, turnover who manipulate the exchange rate through other crypto exchanges.

The government has taken measures to protect the naira, including blocking the online platforms of Binance and other crypto firms and detaining two senior executives of Binance. The CBN has also sold $581 million in the official market this year, which accounts for only 3.2% of the total market turnover of $17.938 billion. The central bank governor has stated that the recent sharp rise in the naira is a positive verdict

Key Takeaways

• Naira appreciated 9.8% to N1,275/USD, breaking below N1,300 resistance level.
• ABCON plans to unify retail forex market to tackle volatility and boost compliance.
• Naira lost 26.2% in 2 weeks, falling from N1,125 to N1,300/USD due to high demand.
• EFCC arrested 34 alleged currency speculators to stabilize the naira.
• Senate calls for coordinated efforts to address naira instability and depreciation.