Naira Regains Strength Against U.S Dollar at Official, Parallel Market

The naira yesterday recorded a major leap, one of its biggest in nearly one year.

It closed at N1,515 to the dollar, representing N200 gain from N1,715 to the dollar recorded on Thursday.

The naira appreciation came amidst a report by the National Bureau of Statistics (NBS) crediting Nigeria with a N5.81trillion trade surplus in the third quarter of 2024 (Q3 2024).

The country’s total merchandise trade stood at ₦35,160.44 billion during the period under review.

According to parallel market traders, the naira appreciated to N1,730/$ on Monday — from the N1,735/$ traded on November 29.

The naira appreciated further, trading at N1,725/$ on Tuesday, and N1,695/$ on Wednesday.

Yesterday’s closing rate represents a significant improvement for the national currency, strengthening below N1,600 in nearly six months.

This gain came as traders offloaded dollars in response to the Central Bank of Nigeria’s (CBN) new foreign exchange (FX) framework.

The naira also recorded gains at the official market, appreciating by 2.08 per cent, or N32, as the dollar was quoted at N1,535 yesterday compared to Thursday’s closing rate of N1,567 at the Nigerian Foreign Exchange Market (NFEM), according to CBN data.

Analysts said FX speculators have lost over N10 billion during the current naira rally and will record more losses as the greenback holders dump it in the open market.

They said the era of forex speculation and distortions in the domestic foreign exchange market came to an end on December 2 after the CBN-backed Electronic Foreign Exchange Matching System (EFEMS) began operations.

Observers say the recovery of the naira shows the effectiveness of the CBN’s strategic interventions in the FX market.

Market analysts point to the improved price discovery mechanism facilitated by the Bloomberg BMatch platform as a catalyst for increased confidence among market participants.

The Bloomberg BMatch system is an automated trade-matching platform introduced to enhance transparency and operational efficiency in the FX market.

Traders have reportedly responded positively to the automated system, which reduces discrepancies in pricing and enhances liquidity.

The resultant reduction in speculative trading has contributed to the stabilization of the naira in both official and unofficial markets.

The implementation of the FX policy, announced last month, and confirmed by CBN Governor, Olayemi Cardoso at the 59th Bankers Annual Dinner organised by the Chartered Institute of Bankers of Nigeria (CIBN) in Lagos, came with diverse implications for all segments of the financial markets that deal in forex, including rebound in the value of the naira across markets.

Speaking at the event, Cardoso described EFEMS as one of the many gains of the exchange rate unification policy expected to birth several other gains in the market operation.

He said the policy would not only put forex market distortions under check, eliminate speculative activities and instill transparency, but would also make it difficult for abuse in the market to persist.

He said: “On the 2nd of December 2024, the foreign exchange market will begin trading on the electronic FX matching system to further enhance transparency, restore confidence, and attract new investments.

“Coupled with an improved framework for deploying products targeting the Nigerian Diaspora and efforts to establish a well-functioning FX market, we anticipate increased Diaspora and foreign investments over the next 12 months, building a more resilient and liquid FX market.”

Cardoso said an enabling policy environment has led to the doubling of monthly remittances from an average of $300 million in 2023 to nearly $600 million in August 2024.

“We are committed to further integrating the Nigerian Diaspora into our financial system, exemplified by the introduction of the non-resident Bank Verification Number registration.

“We expect our financial institutions to develop products that not only enable the Diaspora to support their families but also provide opportunities for savings and investment in Nigeria,” Cardoso said.

Cardoso said the current exchange rate for the naira does not reflect the true value of the local currency.

He said the current US dollar exchange rate reflects the price that the most desperate buyers are willing to pay, and this, in the apex bank’s view, does not represent the true market value of the naira.

The CBN boss said the apex bank expects that the introduction of the electronic marketing system will correct these distortions by enhancing price discovery process for the naira.

Besides, he expects the move to significantly boost the apex bank’s oversight and integration capabilities, ensuring a more stable and transparent foreign exchange market.

Cardoso also said that an FX market defined solely by when and how the central bank buys or sells dollars is inadequate for the needs of a dynamic economy like Nigerians.

“Now is the time for banks to step up to their intermediation and market making responsibilities providing customers with the right solutions to run their businesses and manage risk effectively,” he said.

On his part, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Aminu Gwadabe, said the take-off of the EFEMS is a step in the right direction.

According to him, the EFEMS will not only bring sanity to the market but ensure that new entrants into the market, including post recapitalisation Bureau De Change Operators, will simply fit it, and follow set guidelines that promote transparency and accountability.

Gwadabe said: “It is a good development as the CBN has cleared post recapitalization BDCs to participate in the new EFEMs platform.

He said the move will boost forex liquidity in the retail end of the market, achieve price discovery and enhance transparency and regulatory policy oversight.

He added: “It is in line with our advocacy for a unified, centralised and democratised foreign exchange market.

“We wish the policy is effective before the conclusion of the BDCs recapitalization process.

“It is another spice to encourage BDCs in meeting the new recapitalisation requirements and raises hope for members and new entrants into the forex market.”

The EFEMs journey started with a circular signed by Omolara Duke, director of Financial Markets Department.

According to the bank, under this system authorised dealers will conduct all forex transactions in the inter-bank market on the EFEMS system approved by the CBN, where transactions will be reflected immediately.

“The new system is expected to enhance governance, transparency and facilitate a market-driven exchange rate that will be accessible to the public.

“This development is expected to reduce speculative activities, eliminate market distortions and give the CBN improved oversight capabilities to effectively regulate the market,” the apex bank noted.

The CBN said it will publish real-time prices and buy/sell orders from the system. It said in collaboration with the Financial Markets Dealers Association, it will publish the rules for the EFEMS.

It further said that the Nigerian FX Code and the Revised Market Operating Guidelines for the forex market will also provide guidance to market participants.

“Authorised dealers are therefore required to comply with extant guidelines and regulations governing the Nigeria foreign exchange market and ensure that all necessary documentation, training and systems integrations are concluded ahead of the go live date.”

Analysts said the system is expected to instantly reflect data on all FX transactions conducted in the interbank market and approved by the CBN.

The CBN will also publish real time prices and buy/sell orders data from this system.

Nigeria is facing an acute forex crisis, but there have been market distortions by speculators and illicit traders, which worsen the nation’s dollar availability.

Hence the system was launched in a bid to give the CBN improved oversight capabilities to effectively regulate the market, reduce the rate of speculation and stabilise the foreign exchange market.

The CBN will publish the rules of engagement for the EFEMS for both authorised dealers and buyers, in collaboration with the Financial Markets Dealers Association (FMDA).

The Nigerian FX code and the revised market operating guidelines are also available to provide guidance to market participants.

Nigeria records N5.81tr trade surplus in Q3 2024

The National Bureau of Statistics (NBS) yesterday said Nigeria recorded N5.81trillion trade surplus in the third quarter of 2024 (Q3 2024).

The country’s total merchandise trade stood at ₦35,160.44 billion during the period under review.

This was contained in a document entitled “Trade in Goods Statistics Q3 2024.”

According to the document, Nigeria exported goods of N20.48 trillion and imported goods worth NN14.67 trillion during the period.

The document showed that Nigeria earned N13.40 trillion from crude oil and N7.08 trillion.

It put Nigeria’s total merchandise trade at N35.16 trillion in Q3, 2024, which represents an increase of 81.35% compared to the value recorded in the corresponding period of 2023 and a rise of 13.26% over the value recorded in the preceding quarter.

In the quarter under review, NBS said “exports accounted for 58.27% of total trade with a value of ₦20.486.39 trillion, showing an increase of 98.00% rise over the value recorded in the third quarter of 2023 (N10.346.60 trillion) and 16.76% compared to the value recorded in Q2 2024 (N17.545.62 trillion).

“Nigeria’s exports trade continued to be dominated by crude oil exports, in the third quarter of 2024, crude oil export was valued at N13.406.37 trillion representing 65.44% of total exports while the value of non-crude oil exports stood at N7. 080.02 trillion, accounting for 34.56% of total exports; of which non-oil products contributed N2.501.85 trillion or 12.21% of total exports.”

On import, NBS said: “During the third quarter of 2024, total imports were valued at N14.674.05 trillion, accounting for 41.73% of total trade.

“Using the Standard International Trade Classification, the top-ranked group import was ‘mineral fuels’ with N5.140.10 trillion representing 35.03% of total imports. This was followed by “machinery and transport equipment” with N3.782.19 trillion (25.77% of total imports) and ‘Chemicals & related products’ with N1.73.01 trillion (13.45% of total imports).”

The document said Nigeria imported goods mainly from Asia, valued at N7.290.86trillion representing 49.69% of total imports.

It said this was followed by imports from Europe with N5.355.92 trillion or 36.50%, America with N1.440.79 trillion or 9.82%, while imports from Oceania stood at N73.91 trillion or 0.50% in the third quarter of 2024.

NBS said trade with African countries stood at N512.56 billion or 3.49% of total imports of which imports from ECOWAS countries amounted to N72.71 billion or 0.50% of total imports.

Imports from China were valued at N3.574.79 trillion, representing 24.36% of total imports.