In a significant turnaround, the official foreign exchange market witnessed a staggering 180.59% increase in dollar supply, reaching $440.13 million on Friday. This surge, driven by commercial banks’ actions to comply with recent Central Bank of Nigeria (CBN) regulatory measures, resulted in the Naira closing the week at N1,435.53 per Dollar after a turbulent week.
As part of the efforts to bridge the gap between parallel and official exchange rates, the CBN rolled out new circulars and guidelines, including the “Harmonisation of Reporting Requirements on Foreign Currency Exposures of Banks.” Expressing concern over the growing foreign currency positions held by banks, the CBN mandated that banks’ Net Open Position (NOP) should not exceed 20% short or 0% long of the bank’s shareholders’ funds.
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With a February 1, 2024 deadline for compliance, the banking sector anticipates selling approximately $5 billion in response to the new circular. This move aims to enhance liquidity, stabilize the exchange rate, and attract foreign investors.
Economic Implications and Global Recognition
Despite the regulatory shifts, the Naira recorded a marginal appreciation, closing at N1,435.53 per Dollar. The parallel market also saw gains, trading at N1,440 per US dollar on Friday.
S&P Global Ratings affirmed Nigeria’s credit ratings and maintained a stable outlook, citing the government’s commitment to reform as a key factor. The stable outlook hinges on the successful delivery of the reform agenda, which is expected to support growth and fiscal outcome.
As the country navigates through costlier imports and addresses FX arrears, the surge in dollar supply indicates a strategic move to align with CBN guidelines, ultimately influencing economic stability and global perceptions of Nigeria’s financial landscape.
