The exchange rate between the naira and the dollar continued its rapid appreciation on the official EFEM market, closing at N1,535/$1 on Friday, December 6, 2024.
This marks a significant milestone, as the naira strengthens further following three consecutive days of appreciation since the Central Bank of Nigeria (CBN) introduced the Enhanced Foreign Exchange Market System (EFEMS).
For the trading day, the intra-day high was N1,575, while the low was N1,510, with the average rate printing at N1,533.
Meanwhile, the black market rate fell sharply to as low as N1,570/$1, with operators reporting an unusual scenario where there were more sellers struggling to find buyers.
According to sources who spoke to Nairametrics, “No one wanted to buy dollars,” indicating a fundamental shift in market sentiment.
Some sellers informed Nairametrics they offloaded for as low as N1,500/$1. Meanwhile some cryptocurrency platforms exchanged stablecoins for the naira at less than N1,500$1 via P2P platforms.
Sustained rally in the official market
At N1,535/$1, the naira recorded one of its best performances in recent months, adding to the momentum built since EFEMS was launched.
- Friday’s closing rate represents a notable improvement over the previous day’s N1,567/$1, reflecting increasing demand for the naira in the official forex market.
- On the parallel market, rates dropped further to about N1,570/$1, as sellers struggled to find buyers.
- Meanwhile, some parallel market operators suggest the exchange rate sold for as low as N1,500/$1 for inflows.
- The unusual glut of dollar sellers reflects growing confidence in the naira’s trajectory and reduced speculative activity.
- This aligns with the narrowing gap between the official and black market rates, which has fallen to less than N35, or approximately 2.3%, as of Friday’s close.
- Investment platforms like Bamboo and Trove continued to quote rates for converting naira to dollars at N1,549.50 and N1,629.49 respectively.
- This compares to compared to N1,653/$1 and N1,654/$1, suggesting a slight lag in adjustment compared to official and parallel markets.
Meanwhile, flagship cryptocurrency Bitcoins sold for $101k as of 8pm Nigerian time with altcoins all showing signs of gains ahead of an impending Trump Presidency.
Black market dynamics shifting
The rapid appreciation of the naira on the parallel market suggest the EFEMS is impacting unofficial forex operations as speculators struggle to understand the impact.
- With fewer buyers willing to hoard dollars and more sellers looking to offload, the naira’s strength appears to be translating across both official and unofficial markets.
- Market analysts suggest that this development signals a paradigm shift, as individuals and businesses now see greater value in holding naira over dollars.
EFEMS driving transparency
The introduction of EFEMS by the CBN appears to be driving transparency and efficiency in Nigeria’s forex market.
The platform, which consolidates all forex transactions into a single market, has now delivered gains for four consecutive days, further narrowing the disparity between the official and parallel market rates.
EFEMS requires all FX transactions to be priced through the system, ensuring that daily exchange rates are transparent and accessible to the public.
The centralized pricing mechanism has been pivotal in reducing speculative behavior and bolstering confidence in the naira.