Following the Central Bank of Nigeria's (CBN) declaration that it has cleared all valid foreign exchange backlog, the naira's value took a turn for the better, rising by 12% by the close of trade last week.
The naira's value, which ended the previous week at N1,502 to the dollar, increased to N1,431.49 on Friday of last week. Aside from the liquidity generated by the clearing of the backlog, the influx into the Nigeria Autonomous Foreign Exchange Market (NAFEM) also boosted liquidity.
The CBN said last week that it has entirely cleared the verified foreign exchange backlog with the latest payment of $1.5 billion. In addition to that, the apex bank intervened in the market three times within the week, totaling $195 million.
Inflows into the official market increased by 47.2% week on week to $1.5 billion from $1 billion the previous week. Similarly, the naira's value in the parallel market increased by 6.7% to trade at N1,495 per dollar.
Trades at the NAFEM were completed within the N1,300 - N1,640 per dollar band.
In the Forwards market, naira rates strengthened across various contracts, with the 1-month up 9.6 percent to N1,460.81/USD, the 3-month up 9.4 percent to N1,500.26, the 6-month up 8.4 percent to N1,562.99, and the 1-year up 6.5 percent to N1,705.82/USD.
Analysts believe that the CBN's increased intervention in the foreign exchange market, which includes paying off the last of the forex backlogs and beginning retail sales of dollars to banks in the range of N1,300 - N1,400 to the dollar, will boost confidence in the FX market and stabilise the naira.
