Experts: Naira Resurgence Spurred by Renewed Confidence, CBN Strategic Interventions
Experts in the Nigerian financial service sector have attributed the recent gains by the naira against the U.S Dollars to a combination of factors including renewed market confidence and strategic interventions by the Central Bank of Nigeria (CBN).
In a significant turn of events, the naira has witnessed a robust resurgence against the US dollar in recent days. The naira strengthened further last week, buoyed by a combination of factors, according to analysts.
A breakdown of the performance showed that at the official NAFEM window, the naira last Friday closed at N1,453/$1, a significant gain from N1,598/$1 at the beginning of the week. The parallel market also saw positive movement, with the Naira closing at N1,470/$1 last Frday up from N1,600/$1 on Monday.
Speaking on the development, Special Adviser to the Senate Committee on Banking, Insurance, and Other Financial Institutions, Uche Uwaleke, hailed the recent developments as a positive shift in sentiment.
Uwaleke noted that the gains are as a result of CBN’s actions, including the clearance of foreign exchange backlog and the resumption of FX sales to qualified BDCs.
Furthermore, Uwaleke highlighted favourable oil prices and increased crude oil production as additional factors supporting the naira, which has also aided the increase in external reserves as well as capital inflows from multilateral loans.
He said: “It is a welcome development, what is happening now is the return of confidence to the forex market as a result of some of the actions of the CBN. Also, the ability of the central bank to clear of valid forex backlog has helped to bring down speculation and improve confidence.
“The resumption of FX sales to qualified BDCs has gone a long way in improving liquidity in the retail segment of the forex market which has also reduced speculative activity. Also, when the CBN began the process of sanitizing the BDC space including through withdrawal the licence of over 4000 BDCs in my view, that has gone a long way to reduce speculation and the clamp down on Binance too I will say has been positive because Binance activities were helping to fuel speculation.”
He added that the increase in crude oil production and favourable oil prices have also played a pivotal role in supporting the naira gains.
He added: “Crude oil production has increased from 1.5 million barrels per day to 1.65 million barrels per day, now approaching 1.7 million barrels per day, and oil price has also been favorable. So fortunately for Nigeria, oil prices has also been on the rise.
“So, with favorable oil price, increase in crude oil outputs as a result of a reduction in crude oil thefts. So we are having an increase in crude oil revenue, and that is translating to an increase in external reserves.
“Central bank has also received some loans from Afreximbank from the World Bank, I also see a situation in which by and the exchange rates may, may stabilise around maybe N1000/$1 naira or N1100/$1 naira by the end of the year.”