By Chinwendu Obienyi
Despite the sting operation carried out by security operatives on bureau de change operators, naira has depreciated by 0.3 per cent to close at N1,503.38/$1 on the official Nigerian Autonomous Foreign Exchange Market (NAFEM), while at the parallel market where residents who cannot access the official market are forced to obtain FX, the naira sold at N1,540/$1.
This has led to several analysts stating that the incumbent government and the Central Bank of Nigeria (CBN) are trying to achieve some sort of convergence between the official and parallel market rates.
Currently, the naira is facing strong headwinds as the availability of the dollar in local markets plummeted sharply, adding pressure on CBN to raise interest rates to attract foreign exchange inflows at its policy meeting scheduled to be held on February 26-27, 2024.
The apex bank at the start of the year, took several monetary actions to improve investor confidence, pricing, and market dollar liquidity.
The CBN Governor, Yemi Cardoso, last week, informed the National Assembly that FPIs have already started to provide the economy with much-needed foreign cash because of the changes, revealing that more than $1 billion has been drawn into the market consequently.
During his speech before the National Assembly, Cardoso re-emphasized that Nigeria has reached an inflection point and that the ongoing critical reforms across various segments would tackle long standing legacy issues. He highlighted recent upgrades in credit ratings by international agencies and commendations from the International Monetary Fund (IMF) and World Bank as proof of reform progress.
Regarding the domestic economy, the apex bank governor aligned with the FG’s 3.8 per cent growth projection for 2024, stating that the outlook was based on expected gains from increased crude oil production, higher crude oil prices and ongoing reforms. He also noted that he expects average headline inflation rate to ease to 21 per cent at the end of the year before blaming the naira pressure on simultaneous increase in dollar demand for education, healthcare and imports alongside declining supply.
Cardoso also argued that several strategies such as unifying FX segments, clearing outstanding FX obligations, enforcing banks’ Net Open Position (NOP) limit amongst others, were in place to enhance liquidity and price discovery in the FX market.
In his interview with Arise News, the apex bank governor stated that out of the $7 billion FX backlog inherited, the CBN had cleared $2.5 billion in verifiable claims, with $2.2 billion outstanding and $2.4 billion having irregularities.