Naira Strengthens to N1,610 per Dollar Amidst Declining Demand

February 4, 2025

The Nigerian Naira has experienced a notable appreciation in the parallel market, reaching N1,610 per US dollar, an improvement from N1,615 observed last Friday. This trend is attributed to a persistent decrease in dollar demand.

In contrast, the official market recorded a depreciation, with the Naira trading at N1,495.6 per dollar, down from N1,474.78 previously. This shift narrows the gap between the parallel and official exchange rates to N84.4 per dollar, a significant change from the N141.4 difference noted last week.

Several factors contribute to the Naira’s strengthening in the parallel market:

• Reduced Dollar Demand: The ongoing Chinese New Year celebrations have led to a slowdown in international trade activities, resulting in decreased demand for the dollar.
• Central Bank Initiatives: The Central Bank of Nigeria (CBN) recently introduced a foreign exchange code, aiming to enhance transparency and stability in the forex market. This move has bolstered confidence among currency traders.
• Market Reactions: Anticipating a further decline in dollar demand, some traders have offloaded their dollar holdings, increasing the supply in the market and supporting the Naira’s appreciation.

Additionally, commercial banks have resumed honoring customer requests for Personal Travel Allowance (PTA) and Business Travel Allowance (BTA), further easing the demand pressure in the parallel market.

As the Naira continues to navigate these dynamics, stakeholders remain watchful of both domestic and international factors that could influence its trajectory in the coming weeks.

Source: Vanguard News