The Nigerian naira strengthened against the US dollar, closing at N791.75/$1 on the official market.
According to data from the FMDQ Stock Exchange, the naira increased by 5.87 percent or N49.39 from the previous day’s N841.14/$ rate in the Nigerian Autonomous Foreign Exchange Market.
However, the naira was expected to rise following recent moves by the Central Bank of Nigeria to clear some of the foreign exchange backlog.
The highest bid by traders for a dollar was N1,120/$1 while the intraday low was N701/$1, representing a wide spread of N419/$1. Forex turnover at the close of the transaction was USD 157.78 million.
Meanwhile, last week, the CBN said it had started clearing the backlog of foreign exchange forward contracts. This move is expected to bring relief to the naira, the business community and the economy at large.
The country has been struggling with persistent dollar shortages since foreign investors abandoned local assets. Since then, investors have yet to return, and the largest bank is struggling to meet demand for dollars in the country.
The central bank payments followed an October 23 announcement by Finance Minister Wale Edun that Nigeria was expecting inflows worth $10 billion to improve foreign exchange market liquidity.
This will provide relief to local lenders who are struggling to meet customer demands due to chronic dollar shortages in Africa’s largest economy.
Commenting on the CBN’s clearing of the Forex backlog, the Vice President of the Lagos Chamber of Commerce and Industry, Gabriel Idahosa, said the clearing of the Forex Futures backlog would restore confidence in the traditional market.
“The new move by the CBN to clear arrears with international lenders gives a signal that the leading bank is returning to trade and business. In addition to restoring the letter of credit, it generally restores confidence in the traditional market. Restores the confidence of portfolio investors and international airlines. It will also bring foreign direct investment,” Idahosa added.