For the first time in five months, the Nigerian naira improved significantly in the currency market, trading below N2,000 per British pound (£).
Naira’s Performance
At the start of the week, the naira was trading at N2,225/£1 but strengthened to N1,980/£1 by the weekend, gaining N245 in value within just one week.
On Saturday morning, 6th of Dec., 2024, the black market rate for the pound stood at N1,980, reflecting better conditions in Nigeria’s foreign exchange market.
Now, Nigeria’s currency market has been in trouble due to low oil production, irresponsible government spending, weak exports, people hoarding foreign currency, and speculative trading.
However, the naira regained strength this week due to:
Increased inflows from the Central Bank of Nigeria (CBN).
Successful issuance of Eurobonds.
A more reliable foreign exchange (FX) trading platform, boosting confidence in the currency.
Now, this new foreign exchange platform, the Bloomberg BMatch trading system, was introduced on November 26, 2024 by the CBN to improve FX trading. This platform ensures transparency and efficiency in currency trading.
The BMatch system uses automation to match trade prices, which enhances market trust and ensures that prices are clear to everyone.
However, speculators, who profit from price manipulation, are struggling because the new system has stabilized prices and curbed unofficial market activities. On the other hand, the naira’s strength is making more sellers willing to sell foreign currency, while buyers are less interested in hoarding dollars.
CBN Rules to Streamline FX Trading
The CBN introduced rules for the new FX system, called EFEMS, requiring all transactions to go through it. Key rules include:
Minimum tradable amount: $100,000.
Transparency in daily exchange rates.
What You Should Know
The UK is Nigeria’s largest source of foreign investment, accounting for nearly half of Nigeria’s capital imports in the first half of 2024, totaling $2.93 billion and over the last ten years, the UK has invested more than $47.5 billion in Nigeria, highlighting strong financial ties between the two countries.
And recently, the British pound has been doing well, reaching a 3-week high against the U.S. dollar.
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