ON FOREX WINDOW, $1.7 BILLION WAS EXCHANGED IN A SINGLE WEEK.

In the past week, there has been a 276.1% increase in FX transactions at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, totaling $1.7 billion.

The only official market trading sector available to investors, exporters, and end users is called NAFEM. Since the Central Bank of Nigeria (CBN) eliminated numerous exchange rates, dealings in FX are conducted at exchange rates that are set by the conditions of the market, resulting in effective and efficient price discovery in the Nigerian forex market.

Afrinvest West Africa reported the FX window in a report over the weekend the exchange rates for official and black markets.

The article claims that while the naira fell 2.4% against the dollar to end at N1,169.99 at the NAFEM official window, it gained 7.4% to close at N1,145 against the dollar on a weekly basis at the parallel market.

The CBN persists in its short-term efforts to fortify the national currency. Notwithstanding a week-over-week increase in currency market activity to $1.7 billion during the NAFEM window, the naira fell 2.4% against the dollar to settle at N1,169.99.

The statistics showed that at the end of the week, the naira was trading at N1,145 to the dollar on the parallel market, up 7.4% for the week.

As market volatility subsided after the central bank decided to start selling dollars to bureau de change operators, the local currency lately started to rise quickly.

Demand for forex is being driven by legitimate needs, such as Form A applications for school fees, medical expenses, Personal Travel Allowance (PTA), and Business Travel Allowance (BTA). The use of Form Q indicates that Small and Medium Enterprises (SMEs) are also struggling with the shortage. As a result of the naira's recovery, according to Bismarck Rewane, Managing Director of Financial Derivatives Company Limited, cost pressures should lessen.

According to Rewane, since February, the naira has gained considerably on all markets, driven by the cleaning up of the FX market, a rise in the supply of FX, and a decline in the demand for dollars.

The CBN's credibility and confidence have increased as a result of the $7 billion verified currency backlog. But the crucial issue still stands: Will the naira depreciate once more？ If Nigeria keeps acting morally, the answer is no. With foreign portfolio investments increasing, the outlook for forex earnings is positive. Significant price increases in Nigeria's main export goods, with cocoa reaching a record high of nearly $10,000 per tonne on the international market and oil prices surpassing $85 billion after output reached an astounding 1.48 million barrels per day in February 2024, according to Rewane.

He went on to say that Naira's appreciation came about as a result of the Monetary Policy Committee (MPC) meeting that took place on February 26 and 27, when interest rates were substantially raised by 400 basis points (bps) to 22.75 percent annually.

In order to control prices, the MPC also decided to raise interest rates by 200 basis points to 24.75% annually during its meeting on March 24 and 25.

Together with the CBN's house-cleaning effort to reduce excess demand for dollars, these actions indicate that the apex bank would stick to the tried-and-true strategy of positively anchoring inflation and stabilizing exchange rates. As a result, Rewane stated, “the naira is expected to sustain appreciation, albeit slowly.”