The Nigerian naira has strengthened for the third consecutive day, reaching N1,572.20 per dollar due to the Central Bank of Nigeria's retail Dutch auction. This development is boosting foreign exchange inflows and stabilizing the economy, with potential reductions in FX market volatility expected in the second half of 2024.
The Nigerian naira has seen its third consecutive gain in the official foreign exchange market, strengthening to N1,572.20 per U.S. dollar. This improvement comes in the wake of the Central Bank of Nigeria's (CBN) retail Dutch auction, which aimed to ease the pressure on foreign exchange demand. During the auction, the CBN sold $876.3 million at a rate of N1,495 per dollar to 26 qualified banks, supplying about 75% of the requested $1.2 billion.
This strategic move has led to incremental gains in the naira's value, with the currency appreciating by 1.23% on Friday, compared to Thursday’s rate of N1,593.62 per dollar. The auction also highlighted significant improvements in foreign exchange inflows into Nigeria, which surged by 55% year-on-year to $25.4 billion in the first half of 2024. The CBN’s gross reserve balance also rose to $36.9 billion as of August 7, showing an 11.7% year-to-date increase.
These developments suggest a potential reduction in volatility within the FX market for the remainder of 2024. However, the overall impact on import costs and inflation will depend on broader economic conditions and the CBN's ongoing policy measures. Analysts believe that these gains could contribute to a more stable economic environment, provided that external market pressures remain manageable.
