NIyi JACOBS
The naira surged to a new high of N1,535/$1 on the official market on Friday, December 6, 2024, marking the third consecutive day of gains following the introduction of the Central Bank of Nigeria’s (CBN) Enhanced Foreign Exchange Market System (EFEMS).
During the trading session, the intra-day high reached N1,575, while the low was N1,510, with an average rate of N1,533. This continued rally signals increased demand for the naira, as market participants gain confidence in its sustained value.
However, the most notable shift took place in the parallel (black) market, where dollar sellers found themselves unable to find buyers at expected prices. Rates that had soared as high as N1,640 earlier in the week plummeted to around N1,570/$1. Some sellers were even forced to offload their dollars at rates as low as N1,500/$1, according to market sources.
One black market trader shared with Nairametrics, “There are more sellers than buyers right now. No one’s willing to buy dollars at these levels,” signaling a dramatic change in market sentiment. This reversal has triggered volatility in the market, with some P2P platforms exchanging stablecoins for the naira at rates below N1,500/$1.
The sudden shift in demand is attributed to traders’ cautious stance, as they are reluctant to stockpile dollars amid expectations that the naira will continue to appreciate. Many market participants now prefer to hold naira in anticipation of further gains, signaling a fundamental change in market psychology.
The official forex market has remained steady, buoyed by the impact of EFEMS. The naira’s closing rate of N1,535/$1 on Friday represented a notable improvement from Thursday’s N1,567/$1, continuing the trend of narrowing the gap between official and parallel market rates.
Meanwhile, black market rates dropped as low as N1,570/$1, suggesting a significant reduction in the demand for dollars. In some instances, the exchange rate for inflows fell as low as N1,500/$1, highlighting the broader shift away from dollar hoarding.
Investment platforms such as Bamboo and Trove have adjusted their rates for converting naira to dollars, quoting N1,549.50 and N1,629.49, respectively. These figures still reflect slight delays in adjusting to the market’s rapid changes but align with the overall shift towards a stronger naira.
The introduction of EFEMS has played a crucial role in fostering greater market transparency. By consolidating all forex transactions into a single platform, the system has curtailed speculative behavior, increased market confidence, and contributed to the naira’s growing stability.
As the naira continues to strengthen, analysts predict a shift away from dollar demand, further bolstering the naira’s position in both the official and parallel markets
