Naira Shows Mixed Performance Weakens to N1,739/$
In a continuing display of Nigeria’s complex currency dynamics, the Naira exhibited divergent movements across different market segments yesterday. While the parallel market saw the local currency weaken to N1,739 against the dollar from N1,735 the previous day, the Nigerian Autonomous Foreign Exchange Market (NAFEM) painted a more optimistic picture with a significant appreciation.
At the official NAFEM window, the Naira strengthened considerably, trading at N1,601.2 per dollar, marking a substantial appreciation of N52.89 from Wednesday’s rate of N1,654.09. This improvement in the official market was accompanied by a notable surge in trading volume, with daily turnover jumping 69 percent to $230.99 million from the previous day’s $136.68 million.
However, the widening gap between official and parallel market rates remains a concern for economic analysts and policymakers. The spread between both markets expanded to N137.8 per dollar from N80.91, highlighting the persistent challenges in achieving exchange rate convergence – a key objective of recent monetary policy reforms.
The contrasting movements in different segments of the foreign exchange market reflect the ongoing structural challenges facing Nigeria’s currency market. While increased liquidity in the official window suggests improving formal market conditions, the persistent premium in the parallel market indicates continued pressure on the exchange rate system.
Market observers note that these developments come amid broader efforts by monetary authorities to stabilize the foreign exchange market and achieve a more sustainable exchange rate mechanism. The increased trading volume in the official market might signal growing confidence in the formal exchange system, yet the parallel market’s behavior suggests that demand pressures remain significant.
The widening differential between official and parallel market rates could potentially encourage arbitrage opportunities, despite recent regulatory measures aimed at curbing speculation and unifying the exchange rate. As Nigeria continues to navigate these currency market challenges, the effectiveness of current policy measures remains under close scrutiny by both domestic and international market participants.
thedailycourierng news
Reference
Naira depreciates to N1,739/$ in parallel market published in Vanguard