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The Federal Government (FG) appears to have gained a firm grip on the foreign exchange market amidst a sustained appreciation of the Naira against the Dollar.
Yesterday, the local currency surged to N1,340 per dollar in the parallel market, marking a 0.65% increase from its previous rate of N1,350 per dollar on Tuesday. In the official Nigerian Foreign Exchange Market (NAFEM), the Naira exhibited a bullish trend, boasting a remarkable 6.2% gain at N1,300.43 per dollar, compared to N1,382.95 recorded the day before.
However, the gap between the parallel market rate and NAFEM widened to N40.43 per dollar from N32.95 per dollar on Tuesday, indicating a noticeable supply disparity in the market.
Vice President Kashim Shettima offered reassurance yesterday, stating his confidence in the continued stabilization of the Naira in the forthcoming weeks and months.
Shettima’s assertion seems to find validation in the recent decision of the Central Bank of Nigeria’s (CBN) Monetary Policy Committee (MPC), which elevated the Monetary Policy Rate (MPR) by another 200 basis points (BPS) to 24.75 percent. This move comes on the heels of a previous unprecedented 400bps rate hike less than a month ago, aimed at curbing inflation.
Analysts suggest that these successive rate hikes are attracting a surge of foreign exchange inflows in the form of Foreign Portfolio Investments (FPIs), indicative of the government’s prioritization of exchange rate stability over the soaring inflation rate, which reached a 28-year high of 31.7% last month.
In response to the MPR adjustment, analysts at Meristem Securities Limited underscored, “The MPC further emphasized the need to address inflation while reaffirming its commitment to maintaining stability in the foreign exchange (FX) market.”
Vice President Shettima reiterated the government’s dedication to Naira stability during the inauguration of the National Design and Innovation Competition, highlighting the administration’s resolve to tackle issues of food security, nutrition, and insecurity. He lauded the pivotal role of youths in driving creativity and announced plans to integrate young innovators into the government’s $617.7 million investment in the Digital and Creative Enterprises (i-DICE) program.
