Nigeria’s currency recovered from a record low of 1,300 naira on Monday, according to online platform abokiFX, as the central bank began to settle outstanding currency forwards owing to banks. The naira strengthened to 1,000 per dollar on the black market.
Due to excess demand flowing from the official market to the unofficial market, the naira has repeatedly dropped to record lows on the black market, where it is freely traded.
A $1 billion initial payment has reportedly been made, according to financial sources, after the central bank’s announcement last week that it has begun to settle overdue foreign currency forwards owed to banks. Past-due commitments have put pressure on the naira.
On September 26, the day of Olayemi Cardoso’s confirmation hearing before the Nigerian Senate and the recently appointed governor of the central bank, the naira crossed the 1,000 naira threshold on the black market.
Since October, the central bank has refrained from intervening in the official market, contributing to the naira’s decline in the illicit market.
A month after breaking the 1,000 naira barrier, the currency plunged to a record low of 1,300 naira per dollar on the black market due to sparse trade on the parallel market and a shortage of dollars on the official market.
To the pleasure of investors, Nigeria removed limitations on trading the currency on the official market in June, but the anticipated dollar influx has not materialized, sending the naira down.
Cardoso has stated that when regulations for market players are clarified, the naira will change. Nigeria expects $10 billion in foreign currency inflows in the coming weeks, according to Finance Minister Wale Edun, to increase foreign exchange market liquidity.
At 1200 GMT, the naira traded 884.53 to the dollar on the official market.