Naira Performs Better in Black Market Than Official Window as It Gets New Ranking in Africa

• The Nigerian currency has continued its pushback against the US dollar and other major currencies
• The naira traded at about N1,245 per dollar in the parallel market and N251 in the official window
• The development follows a demand by black market operators that the CBN should reduce the buying rate of the dollar it sells to them

The Nigerian currency has continued its upward swing against the US dollar for the fourth consecutive week since its devaluation in January 2024.

The naira appreciated about N245 per dollar in the parallel market against the US greenback, prompting currency dealers to ask the Central Bank of Nigeria (CBN) to review the price at which it sells dollars.

BDC operators propose a new buying rate

The Association of Bureaux de Change Operators of Nigeria (ABCON) asked the CBN to reduce its buying rate for the US dollar to hasten recovery.

ABCON revealed that the N1,251 per dollar buying rate that the CBN pegged for the dealers would result in losses for its members, as the naira currently trades at N1,235 per dollar in the open market.

The currency dealers disclosed this in a letter signed by ABCON President Aminu Gwadabe, addressed to CBN’s trade and exchange department director.

The association said it is the first time that the buying rate for CBN will be higher than the open market value.

Naira appreciates in the official window

The local currency ended last week at N1,251 per dollar, the lowest since February 2024.

Data from NAFEM shows that on Friday, April 5, 2024, currency traders quoted the naira at an intraday high of N1,281 per dollar and a low of N1220.

Analysts believe several policies and circulars of the apex bank buoy the naira’s recovery.

To boost market liquidity, the CBN began selling foreign exchange to Bureau de Change operators (BDCs) at N1,251 per dollar.

The naira’s performance comes amid several predictions by the Economist Intelligence Unit (EIU) and Goldman Sachs that it will plateau at N2,000 and N1,200 per dollar in 2024.

Analyst commends CBN for naira performance

The move follows the CBN’s payment of the $7 billion verified Forex backlog, which was believed to have pressured the local currency.

Reports say these moves are believed to have boosted the naira’s performance against major currencies, leading to a gain of about N800 against the British pound and N660 against the US dollar since February 2024.

Financial expert and stock broker Chidi Chikere said the CBN’s intentional moves have contributed to the naira’s excellent performance.

“If these policies are sustained, we are optimistic that the naira will eventually rally to about N900 per dollar in the official window and lower in the parallel markets.

Chikere revealed that more people are now dumping their forex in the parallel market, leading to the dollar crashing lower in that segment of the FX market.

“We have massive selloffs and dumping in the black markets. Hoarders are afraid they might lose their dollars if they continue to keep them at home and in the banks,” he said.

Naira ranks high among African currencies

This was after the Central Bank of Nigeria (CBN)’s determined efforts had caused the naira to rise from its lowest level this year.

Increasing interest rates and selling dollars straight to foreign currency markets were two examples of these moves.