The Nigerian currency, the naira, witnessed a notable appreciation against the US dollar in both the parallel and official sections of the foreign exchange (FX) market on Monday.
In the parallel market, often referred to as the black market, the naira strengthened to N1,600 per dollar, marking a 1.23 percent gain from the N1,620/$ rate reported on March 8.
In the parallel market, often referred to as the black market, the naira strengthened to N1,600 per dollar, marking a 1.23 percent gain from the N1,620/$ rate reported on March 8.
Bureau De Change operators (BDCs) in Lagos quoted the buying rate of the US dollar at N1,570 and the selling rate at N1,600, offering a profit margin of N30 for currency traders.
Meanwhile, in the official section of the FX market, the naira appreciated by 0.58 percent to N1,617.96, up from N1,627.40 on March 8.
Trading data from the FMDQ Exchange, the platform overseeing official FX transactions in Nigeria, indicated fluctuations within the trading day, with the FX rate reaching as high as N1,650 and dropping to a low of N1,511.
In related news, financial giant Goldman Sachs forecasted on March 7 that the naira would appreciate to N1,200 against the dollar over the next twelve months.
The prediction hinges on the implementation of positive real interest rates and the attraction of capital inflows as solutions to Nigeria’s currency and external liquidity crisis.
Further supporting the naira’s potential for appreciation, the monetary policy committee (MPC) of the Central Bank of Nigeria (CBN) increased the monetary policy rate (MPR), which serves as a benchmark for interest rates, from 18.75 percent to 22.75 percent on February 27.
According to Goldman Sachs, the central bank’s monetary policy adjustments and bill issuance have introduced positive conditions to the foreign exchange market, albeit in a limited form, for the first time.