Naira Soars: Markets Astonished by Currency Revaluation
Prologue
The Central Bank of Nigeria (CBN) has successfully restored confidence in the Nigerian economy as it moved to clear outstanding FX obligations. The resultant surge across the economic landscape was notable as the pivotal moment came with the Naira’s rapid appreciation against the Dollar to close the week $/₦776.14 at the Nigerian Autonomous Foreign Exchange Market, (NAFEM) window. OMO auctions conducted within the week also attracted substantial interest with the market positively noting the upward discount trajectory having closed at 17.50% on Monday and 17.98% on Wednesday.
JP Morgan’s optimistic projection for the Nigerian economy further highlighted the nation’s economic resilience and progress toward a stable and prosperous future.
Naira Soars: Markets Astonished by Currency Revaluation
The week’s currency revaluation marked a turning point in the weakening streak for the local currency.
In a pivotal move to bolster the stability of the Nigerian financial landscape, the Central Bank of Nigeria (CBN) demonstrated its commitment to resolving existing challenges by successfully settling and clearing the Foreign Exchange (FX) backlog for banks and airlines.
This decisive action not only instilled confidence in the market, but also streamlined the FX processes for key players in the industry. The CBN exhibited its efficiency by delivering on a substantial portion, ranging from 75% to 80%, of outstanding matured FX forwards in specific banks. Institutions such as Stanbic, Citi, Rand, Keystone, and Unity, among others, benefited from this strategic initiative. By addressing the FX backlog, the CBN created a more favourable environment for businesses and financial institutions to operate, fostering a sense of stability and certainty within the market.
In the parallel markets opening the week, the Dollar was priced at ₦1,180, and by the end of the week, it had made a significant leap, trading at ₦1,004 against $1. This swift and remarkable appreciation of the Naira against the Dollar intra-week clearly indicates the positive momentum in the foreign exchange market. The upward trajectory of the Naira against the Dollar was met with enthusiasm by all spectators.
The reintroduction of OMOs on Monday was supplemented by a further auction on Wednesday, which garnered substantial attention, with total subscriptions amounting to ₦127.95 billion. It is reported that ₦77.2 billion worth of OMO bills were sold, reflecting the market’s active participation.
The stop rates on various bill tenures, including the 97-day, 181-day, 265-day, and 342-day bills, closed at 13.98%, 14.48%, 14.99%, and 17.98%, respectively.
The markets have come to respect the Tinubu-led administration as a talk-and-do government that must be taken seriously whenever it sets out to achieve anything. As a seasoned market participant put it, ‘they said they would, and they did it!’ The future looks bright for the Nigerian financial markets with FX liberalized and the liquidity clog in the wheel of monetary policy progress thoroughly dealt with.
Local News: Vol 69.
- Nigeria, German firm sign MOU on solid minerals exploration.
- House of Representatives to conduct a petrol subsidy audit to recover $20 billion.
- Senate approves President Tinubu’s ₦2.18b supplementary budget.
- Expert backs Senate on local FX transactions bill.
Global News: Vol 69.
- Stocks gain on optimism fed rates are near peak.
- Short selling ban rocks South Korea’s $1.7 trillion equity market.
- Saudi Arabia, Russia to continue additional voluntary oil cuts.
Outlook
- NTB rates expected to shoot high this week.
- FG expected to disincentivise local FX transactions.
- Offshore inflows expected to start trickling-in soon.
