The Nigerian Naira reported the largest single day strength against the US dollar with a close of ₦1,514.87/$ in the official market on Thursday, 4th September 2023, representing a up ₦6.59 from ₦1,521.46/$ on Wednesday, ahead of Thursday’s public holiday to mark the observation of a public holiday for Eid-ul-Mawlid.
At the Nigerian Autonomous Foreign Exchange Market, the Naira re-strengthened, closing at ₦1,512.96/$, reflecting an increase in the dollar supply. The Naira slightly weakened in the parallel market, closing at ₦1,539/$ from ₦1,533/$ the day before.
The Naira made gains against other major currencies as well, closing at ₦2,036.44/ £1 and ₦1,764.21/ €1 for the pound dollar respectively, representing strong gains since the middle of last week.
The analysts we spoke to agreed the rebound in the Naira against the dollar was made possible by an improved exchange liquidity for foreign exchange, increased investor confidence and stable growth in Nigeria’s external reserves which were just over $41.4 billion at the start of September.
Nonetheless, Nigeria’s continued reliance on growing external borrowing has become a concern, sitting at $46 billion in total external debt. The recent approvals for foreign loans that include infrastructure transport projects shows the heavy reliance of the government on foreign borrowing.
Central Bank of Nigeria stated that the reforms, as recent, like the subsidy’s removal and opening up the foreign exchange market will reflect long-term stability and confidence in the Naira.
As trading resumes after the public holiday, it will be interesting to see if the current positive rally can be held in a period of increasing inflation, rising external borrowing levels and world markets.