Emmanuel OchayiThe Naira strengthened significantly across foreign exchange markets on Thursday, closing at N1,567 to the dollar.
This marks a N41 or 2.5% gain from Wednesday’s rate of N1,608 at the Nigerian Foreign Exchange Market (NFEM), according to data from the Central Bank of Nigeria (CBN).
Join our WhatsApp ChannelThe improvement follows the introduction of an electronic foreign exchange trading framework by the CBN, designed to increase transparency and streamline currency transactions.
How the New Framework Supports the Naira
Under the revised guidelines, the CBN requires authorised dealers to process all forex transactions through the Electronic Foreign Exchange Matching System (EFEMS). The system mandates transparency in pricing and ensures that daily transactional rates are published.
Speaking about the policy, a CBN official stated “This framework consolidates all official FX market windows, ensuring a single, transparent trading environment for all participants. It discourages dealings with unlicensed intermediaries.”
The new guidelines also prohibit forex transactions outside authorised channels. This move is expected to deter speculative trading and illegal market activities that have historically impacted the naira’s stability.
Forex Market Sees High and Low Quotes
Forex dealers quoted the dollar at a low of N1,565, a marked improvement from Wednesday’s lowest rate of N1,590. The highest quote on Thursday was N1,610, a notable strengthening from Tuesday’s peak of N1,664.
The naira’s performance reflects growing confidence in the revised forex framework. Market analysts believe the policy may stabilize the currency, especially if compliance with the guidelines remains strict.
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Broader Implications for the Naira
The naira has been under pressure in recent years due to multiple exchange rates and limited access to forex for businesses. The consolidation of the forex market under the EFEMS aims to address these challenges.
An economic analyst, Tunde Adedayo, explained “The naira’s gains are linked to improved governance in the forex market. If this trajectory continues, we might see increased inflows of foreign exchange.”
Additionally, the guidelines encourage authorised dealers to facilitate forex transactions for businesses and individuals by verifying documentation and adhering to compliance rules.
Can the Naira Sustain Its Recovery?
The new system could enhance liquidity by ensuring interbank trading adheres to EFEMS guidelines. Dealers are required to provide two-way quotes daily, fostering a more predictable and transparent forex market.
However, some experts caution that external factors, such as fluctuating oil prices and global economic conditions, could still influence the naira.
“While the CBN’s policy is a positive step, sustaining these gains will depend on broader economic stability,” noted economist Folake Oladipo.
Naira’s Strength and Public Confidence
As the naira continues to recover, public confidence in Nigeria’s monetary policies may improve. The central bank’s focus on accountability in forex dealings and discouragement of parallel market transactions has been widely welcomed.
The coming weeks will be crucial in determining whether the naira can maintain its momentum under the new forex trading framework.
Emmanuel Ochayi is a journalist. He is a graduate of the University of Lagos, School of first choice and the nations pride. Emmanuel is keen on exploring writing angles in different areas, including Business, climate change, politics, Education, and others.
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