Naira remains stable at N1,339.33/$1 as foreign exchange turnover increases by 81.59%

The naira remained stable at N1,339.33/$1 at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window on Tuesday, marking no change from the previous day’s rate.

This stability comes amid a significant increase in foreign exchange (FX) turnover, which increased by 81.59% to $328.32 million.

According to FMDQ data, the naira remained stable on Monday, May 27, 2024, at the same exchange rate of N1,339.33/$1. However, Monday’s foreign exchange turnover was significantly lower at $180.8 million, reflecting a decrease of 67.50% compared to the previous session at the end of the previous week.

On Tuesday, May 28, 2024, the foreign exchange market experienced a notable recovery with turnover amounting to $328.32 million. This sharp rise of 81.59% indicates renewed activity and demand in the foreign exchange market, likely driven by interventions and policies aimed at stabilizing the naira.

What you should know

The flat exchange rate suggests that the Central Bank of Nigeria’s (CBN) efforts to maintain monetary stability are having an effect, despite fluctuations in market liquidity.

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Analysts have noted that keeping the naira at this rate amidst different levels of turnover points to a controlled exchange rate environment, which is critical for investor confidence and economic planning.

The increase in foreign exchange turnover may be due to a combination of factors, including month-end financial settlements, higher foreign investment inflows and strategic measures by the central bank to ensure sufficient liquidity in the market.

Furthermore, the appreciation and stability of the official market accompanied the auctions of Treasury bills and OMO.

Following the 295th meeting of the CBN Monetary Policy Committee (MPC), which led to an increase in the monetary policy rate (MPR) by 150 basis points to a new unprecedented 26.25%, the CBN offered a total of 508,980 million naira. during the Nigerian Treasury Bill (NTB) auction held on May 22, 2024, with subscription levels significantly exceeding the initial offering, highlighting the continued appetite for fixed income securities amid a volatile economic. There was a subscription of N1.5 trillion but only about N638.98 billion was allocated to treasury bill investors.

The apex bank also raised a substantial amount of N1.16 trillion from the OMO bill auction. This move is part of the CBN’s efforts to control inflationary pressures and stabilize the naira amid the current economic challenges.

Increasing foreign exchange turnover and successful auctions of government securities are central to the CBN’s broader strategy to maintain price stability and support economic growth.

By absorbing excess liquidity, the CBN aims to curb inflation, which has been a major concern of the authorities. The amount raised at the auctions is expected to help mitigate inflationary pressures by reducing the amount of money in circulation, thereby supporting the naira.