The naira depreciated further at the parallel market to close at N1685/$1 at the end of business on Tuesday, December 10, 2024, with the exchange rate falling for the second time since the Central Bank of Nigeria (CBN) migrated to the Enhanced Foreign Exchange Market System (EFEMS) platform.
The drop in the value of the naira represents a N45 or 2.7% loss when compared to the N1640/$1 that was recorded on Monday, December 9, 2024, as the volatility of the foreign exchange market continues.
Local currency recovers at official market
The CBN data shows that the naira recovered from the previous day’s loss to record gains at the official EFEM market trading at N1525/$1 on Tuesday, December 10, 2024, as against the N1538.5/$1 recorded on Monday, December 9, 2024.
- This represents a N13.50 or 0.88% appreciation.
- Intra-day high and low for the day were N1,560 and N1,500 respectively while the weighted average rate is N1,530.
- Tuesday’s closing rate at the EFEM market represents a N13.50 or 0.88% drop over the previous trading day’s N1538.5/$1 signaling a rebound of the local currency at the official market.
With the contrasting performance of the naira in both markets, the gap between the official rate and the black market seems to have widened further from N101.5 to N160.
EFEMS boosting price discovery, transparency
The introduction of EFEMS by the CBN appears to be driving transparency and efficiency in Nigeria’s forex market with the positive gains on the naira evidence of the impacts.
- The platform, launched on December 2, 2024, addresses long-standing issues of market opacity and inefficiency by facilitating smooth trading and consistency among participants.
- EFEMS requires all FX transactions to be priced through the system, ensuring that daily exchange rates are transparent and accessible to the public.
- The platform replaces the fragmented system of multiple windows, such as the Investors & Exporters (I&E) FX Window, SME Window, and Invisible Window.
- Additionally, Nigeria returned to the international bond market last Monday, raising $2.02 billion through Eurobonds sold in two tranches. The offering was oversubscribed by $9.01 billion, significantly boosting liquidity for the local currency.
The Federal Government issued $1.05 billion in 10-year bonds at a 10.375% coupon rate and $700 million in 6-year Eurobonds maturing in 2031 at a 9.625% coupon rate.
What you should know
Nairametrics had earlier reported that the President of the Association of Bureau De Change Operators of Nigeria (ABCON), Aminu Gwadebe, had warned that forex speculators will resist the rapid appreciation of the naira to cover their losses.
Gwadebe had urged the CBN to keep the momentum, discourage the illegal act of speculation and currency substitution as well as engage the BDC operators where volatility is pervasive.
The comments by Gwadebe followed the significant strengthening of the naira at both the official and parallel markets after days of appreciation since the apex bank introduced the EFEMS platform.