The Nigerian foreign exchange market started the week on a high note, with the naira strengthening from N1,602.75/$1 on Friday to N1,572.86/$1.
The dollars bills that forex market participants supplied fell by 20.99% to $848.14 million from $1,073.50 million the week prior.
Last week, the pressure on the naira exchange rate subsided as the nation’s foreign reserves continued to rise for a second straight month.
In an effort to increase market supply, the Central Bank of Nigeria (CBN) has implemented a number of short-to-medium term palliative measures.
Portfolio investors have been drawn to these initiatives, especially Foreign Portfolio Investors (FPIs), who are now encouraged to return to the Open Market Operation (OMO) market.
By encouraging investors to hold unto the naira, the CBN hopes to reduce pressure on the foreign exchange market and increase its to foreign direct investors.
Investors are drawn to the OMO market because of the high yields available, with rates for banks and FPI topping 25%.
Furthermore, rates on Treasury bills have been roughly 20% throughout the duration of the 364-day issue.
With inflation at 31.70%, there is still a sizeable negative real return of more than 11%.
The CEO of the Center for the Promotion of Private Enterprise, Muda Yusuf, stated that since the study is too brief to support a conclusion, it is premature to start celebrating anything.
Before discussing the trend that can be planned with, he needs to observe it for eight weeks.
According to CBN data, as of March 12, 2024, foreign currency reserves stood at $34.37 billion, up 3.62% from the previous day.
The naira closed flat at N1,602.75/$1 on Thursday at the Nigerian Autonomous Exchange Market.
