The Naira appreciated significantly against the United States dollar throughout March 2024, marking a major turnaround for Nigeria’s exchange rate policy.
According to official data, the Naira closed the month at N1309/$1 on the last trading day of the month, up from N1595.11/$11 at the end of February 2024.
This follows the success of several foreign exchange policies, strategies, and interventions by the Central Bank of Nigeria to stabilise and strengthen the country’s currency has resulted in these 21.8% gains, according to nairametrics.
The Naira has also seen an even stronger recovery in the parallel market. The exchange rate improved from N1600/$1 in February to N1250/$1 in March, representing a 28% gain in one month highlighting the effectiveness of the measures taken to bridge the gap between the official and unofficial currency markets.
The gains in the official and parallel market are the largest seen in over 5 years. Before now, the exchange rate was fixed at about N450/$1 for almost two years and around N380/$1 between 2020 and early 2021.
The Central Bank started by addressing suspected cases of excessive foreign exchange speculation and hoarding by Nigerian banks on the official market.
The Central Bank has begun to address suspected cases of excessive foreign exchange speculation and hoarding by Nigerian banks on the official market.
This according to analysts, has resulted in the removal of a large part of speculation from the market and is thus ensuring that only genuine demand for foreign exchange can be seen.
The apex bank also announced the complete clearance of the valid foreign exchange backlog. They noted that they had completely settled the $1.5 billion obligations to bank customers, effectively settling the residual balance of the FX backlog.
At the retail level, policies such as the allocation of $20,000 to each bureau de change at a competitive rate and the removal of the exchange rate cap for international money transfer operators have been crucial to strengthening the exchange rate at the retail level.
The Central Bank also highlighted that a ceiling of $10,000 per customer per year will be imposed on the purchase of foreign currency for school fees as part of measures to manage demand at the retail end of the market.
However, the most effective policy so far is the clampdown on the cryptocurrency platform, Binance, which it accuses of enhancing manipulation of the exchange rate system.
In consequence, Binance withdrew the naira from its website for trading.
