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The naira reclaimed about 5.6% of value lost at the Investors, Exporters’ foreign exchange (FX) market, according to data from the FMDQ Exchange platform. Across the forex market, rates have started to converge.
Amidst the ongoing foreign exchange reforms, the US dollar was sold at N663.04 on Friday, appreciating 5.5754%; from N702.19. The US dollar was sold at N750 on Friday’s close in the parallel market, from N757.
Although the decision to float the local currency has been met with mixed reactions, it is widely believed that this step was necessary to improve Nigeria’s economy, analysts said. The market expects foreign currency inflows after the dust settles.
The non-deliverable forward rate was quoted at N715, when the naira was at N702.19, intraday FX data saw on Refinitiv showed.
Nigeria-based investment firm Cowry Asset Limited said in a note that the decisive argument for this new development still holds that the free market will be able to determine the naira’s true value, leading to more investment inflow and economic growth.
On the contrary, analysts said there may be, in the short term, FX market instability emanating from the inability of the free market to determine the naira’s true value.
Already, the gap between the parallel market and the official window has been reduced strongly while local banks adopt the “willing buyer and seller” FX transactions model.
Data showed that the value of the naira depreciated at the official rate by 233.1% between January 4, 2016, and June 14, 2023, Cowry Asset said in a market brief to investors. Analysts said Naira traded between N199.37/$1 and N664.04/$1, with a loss of N464.67 in value under seven years.
“…we expect to see the foreign exchange market remain volatile in the near term as we begin to see market participants position themselves to determine the fair exchange price levels and, in the medium to long term, ascertain the true value of the naira against the dollar in the market”, Cowry Asset projected.
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