Naira Struggles to Regain Confidence Despite Recent Gains

Gwadebe said the appreciation of the naira can be attributed to the intervention of the Central Bank of Nigeria (CBN) at the Electronic Foreign Exchange Matching System (EFEMS) window, which has significantly boosted supplies, as well as weaker demand in the market.

Naira experiencing attacks

ABCON had earlier revealed that the naira is fast becoming the most unpredictable currency in the world, noting that the local currency has been greatly affected by all kinds of wars ranging from trade, rate as well as speculative attack.

Gwadebe had earlier highlighted some of the challenges affecting the forex market, including global economic uncertainty, regulatory changes, technology advancements and market volatility.

The ABCON boss noted that economic slowdowns in major economies like the US, Europe and China have resulted in decreased trade volumes and increased market volatility.

He also stated that the recapitalization policy for the BDCs has given rise to compliance costs for forex brokers and impacted market liquidity.

In summary, he said that these challenges have resulted in increased market volatility, reduced liquidity, higher trading costs and greater regulatory scrutiny.

Sustaining positive performance of the naira

Gwadebe urged the CBN to always adopt a forward communication strategy on the good news and play down the bad news overloads as part of the ways to sustain the good performance of the naira in the foreign exchange market.

He said, ‘’The naira appreciated significantly at the open market from a low of N1580 per dollar to a higher level of N1545 per dollar during the week. The CBN intervention at the EFEMS window has significantly boosted supplies at the window, coupled with a weaker demand in the market.

‘’Yeah, it is always a good development to witness the local currency gaining strengths versus other foreign currencies but often overburdened by devaluation at the official market and depreciation in the open market.

‘’To achieve a continuing sustainability, the CBN should always adopt forward communication strategy on the good news and dampen the bad news overloads.

‘’Secondly, the CBN is the catalytic actor in the market and should ensure their deliberate intervention across markets extend not only to the wholesale window of banks but to the third leg window of the BDCs to boost supply at the critical retail end of the market.

‘’In all, the naira still suffers loss of confidence and players’ resistance to upload their position during naira hegemony.’’

What you should know

The BDC operators had attributed the crash of the naira in the foreign exchange market to the huge demand for forex due to the windfall from some contractual payments and releases by some Federal Government agencies.

• Gwadebe, who admitted that the forex market is witnessing some unprecedented attacks, noted that the unfortunate development had once again given credence to the need for regulators to be consistent in the implementation of reforms and policies in a volatile forex market.
• He had acknowledged that these occasional shocks in the foreign exchange market are fictitious, discretionary and a burble that will burst.
• Gwadede had also urged the apex bank to revisit its earlier prudential percentage, targeting a fraction of the International Money Transfer Operators (IMTOs) proceeds received by the banks and Fintechs to the BDC window.

The CBN had been announcing several measures to tackle the volatility in the foreign exchange market, which the speculators usually capitalize on to put pressure on the naira.