The foreign exchange market in Nigeria recently witnessed a stunning surge in turnover, reaching $844 million on February 3rd, the highest volume of dollar trade since June 2, 2022. This remarkable increase is a remarkable threefold rise from the $266 million traded on February 1st. The spike is credited to recent reforms introduced by the Central Bank of Nigeria (CBN) governor, Olayemi Cardoso, aimed at enhancing the flexibility of the naira against the dollar and fostering transparency in the official market.
Governor Olayemi Cardoso unveiled a series of measures which has led to improved transparency and a freer trade between the naira and the dollar, a significant departure from the wild swings experienced by the embattled naira in the recent past. The improved supply of dollars has also had a positive impact on the strength of the naira, with the official rate strengthening from N1435/$ to N1419/$ on Monday.
One of the key reforms involved mandating banks to offload excess dollars and the removal of the cap on transactions by International Money Transfer Operators (IMTOs). While the official market has experienced improvements, the parallel market rate has not strengthened as significantly. Consequently, fears have emerged regarding a potential reintroduction of a considerable gap between the official and parallel rates. On Tuesday, the dollar was selling for N1455 on the streets, reflecting a 2 per cent gap compared to the official rate.
During a sectoral debate on the economy with the House of Representatives, Governor Olayemi Cardoso expressed confidence in the positive outcomes emerging from the recent policy interventions by the CBN. He highlighted that as of the announcement, the volume of transactions in the foreign exchange market had surpassed $800 million, marking the first time it had achieved this level in many years. Cardoso also emphasized that the dedicated and relentless efforts being made are certain to bring about significant and positive changes for the Nigerian economy.
These developments signal a turning point for Nigeria’s foreign exchange market, as efforts to foster transparency and enhance the naira’s flexibility against the dollar are showing promising results. With the reforms spearheaded by CBN governor Olayemi Cardoso, the market has experienced a remarkable surge in turnover, reflecting an underlying potential for the Nigerian economy to bounce back stronger.
