The naira, on Tuesday, suffered renewed pressure on the official foreign exchange (CBN) market, losing 0.71 percent against the dollar, but Olayemi Cardoso, governor of the CBN, expressed confidence in market stability.
After trading on Tuesday, the naira depreciated by 0.71 percent as the dollar was quoted at N1,500.79, weaker than N1,490.20 seen on Monday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), data from the FMDQ Securities Exchange Limited showed.
Read also: Naira suffers renewed pressure as Cardoso expresses confidence in stability
Dollar supplied by the willing buyers and willing sellers declined by 10.03 percent to $136.75 million on Tuesday, from $152.00 million recorded on Monday.
The intraday high closed at N1,507 per dollar on Tuesday, slightly weaker than N1,505 closed on Monday. The intraday low depreciated to N1,436, weaker than N1,411 quoted on Monday.
The naira pressure renewed on Tuesday as the dollar traded at N1,505 on the parallel market, also known as black market.
This represents 0.99 percent depreciation compared to N1,490 quoted since almost a month ago, on the black market. Traders attributed the naira weakness to increased demand for dollars by individuals ahead of the summer holiday and importers who need the dollars to import raw materials.
“It is too early to conclude that the renewed pressure on the naira is as a result of the coming summer holiday because it is just a one-day depreciation,” said Abiodun Keripe, managing director, Afrinvest Research and Consulting.
He noted that there is an expected $2.5 billion inflow that can provide succour to the external reserves and strengthen the naira. He said Nigeria is operating a willing buyer, willing seller market and the exchange rate is determined by the level of liquidity in the market.
Nigeria’s external reserves have increased by 2.09 per cent year-to-date to $33.70 billion as of June 21, 2024, from $33.01 billion recorded on January 2, 2024, data from the CBN showed.
The local currency had steadied at N1,490 in almost one month following moderation in demand for dollars by the end users.
In an interview with Bloomberg in London on Tuesday, Olayemi Cardoso, governor of the Central Bank of Nigeria (CBN) had expressed optimism about the recent stability in the foreign exchange market, indicating a potential end to the period of volatility.
“I do believe that we have more or less seen the worst in terms of volatility. We are happy that the market is now such that willing buyers and willing sellers operate within the market,” he said.
“In the past two or three weeks after a period of volatility, we’ve seen a lot of stability within the market, there’s hardly been any movement in the currency,” Cardoso had said.
Cardoso reiterated the determination of the bank’s Monetary Policy Committee (MPC) to tame inflation through conventional methods.
Cardoso noted a deceleration in the month-on-month inflation rates, highlighting it as a positive development. He assured that the Monetary Policy Committee (MPC) members remained vigilant in monitoring inflation trends and ensuring a moderation of inflation numbers.
“MPC members will continue to monitor the trajectory and are determined to ensure that they put inflation under control,” he asserted.
It will be recalled that Nigeria’s annual inflation rose to a 28-year high of 33.95 percent in May 2024, but recent data from the National Bureau of Statistics reveals that the month-on-month inflation rate had slowed for the third consecutive month, validating the effectiveness of the Central Bank of Nigeria’s monetary policy tightening measures.
While highlighting a period of stability following previous volatility in the foreign exchange market, Cardoso expressed optimism about the recent improvements in liquidity and return of confidence to the market.
He attributed the new development to increased liquidity and a calmer approach from market participants on both the buy and sell sides.
“In the past, people were panicking and front-loading their requests,” he explained, stressing that “Now, a lot of that has calmed down. There’s no inclination to do that because liquidity has returned to the market.”
Cardoso also highlighted the significant achievement of merging disparate exchange rates into a more unified system.
“We had two different rates. Right now, we more or less have one rate. And we believe that this is good. It allows companies to plan,” he stated, emphasising the importance of a predictable exchange rate for economic planning and investment.
Furthermore, he expressed confidence in the current market dynamics, where willing buyers and sellers operate freely, noting that it had contributed to the stability of the Naira. He, however, stressed the importance of continuous observation and management to ensure the market benefits all participants.
Governor Cardoso highlighted the crucial role of coordinated monetary and fiscal policies in achieving economic stability, adding that the collaboration was essential for managing the macroeconomic fundamentals that influence the market, aiming to provide the best value for the naira.