Naira makes heavy recovery against Dollar with CBN’s New Directive

The Naira has significantly appreciated in value against the US Dollar following the Central Bank of Nigeria’s (CBN) implementation of a new policy.

The Central Bank of Nigeria’s (CBN) directive mandating banks operating in the interbank FX market to adopt the Bloomberg BMatch trading platform has begun yielding positive outcomes.

The Naira, which had experienced severe depreciation in recent months, recorded a remarkable recovery in both official and parallel markets.

On Friday, the Naira closed at N1,515 to the dollar in the parallel market, reflecting a 2.08 percent appreciation from the previous day.

This is a significant improvement from its low of N1,755 per dollar on November 21, 2024, prior to the implementation of the new FX policy.

The currency’s 18.8 percent recovery in the black market—equivalent to N240—has been attributed to traders offloading dollars in response to the new framework introduced by the CBN.

At the official market, the Naira also gained ground, appreciating by 2.08 percent, or N32, to close at N1,535 to the dollar on Friday.

This is an improvement from Thursday’s closing rate of N1,567, according to data from the Nigerian Foreign Exchange Market (NFEM).

Since the Bloomberg BMatch system became operational on December 2, 2024, the currency has strengthened by 8.97 percent, or N137.69, from its November 29 closing rate of N1,672.69.

The Bloomberg BMatch system is an automated trade-matching platform introduced to enhance transparency and operational efficiency in the FX market.

The platform, launched on December 2, 2024, enables seamless trading and uniformity among participants, addressing long-standing concerns about market opacity and inefficiency.

In a statement, Omolara Duke, Director of the Financial Markets Department at the CBN, described the Bloomberg BMatch platform as a transformative tool for the FX market.

“This initiative represents a significant advancement in ensuring uniformity and seamless operations among market participants,” she said in a circular addressed to banks.

To further enhance market operations, the CBN last week issued detailed guidelines for the interbank FX trading system under the Electronic Foreign Exchange Matching System (EFEMS).

The guidelines stipulate a minimum tradable amount of $100,000, with incremental clip sizes of $50,000, aiming to foster greater transparency and efficiency.
Read Also: Shettima launches 2024 Nigeria Economic Report, promises inclusive growth

The recent recovery of the Naira shows the effectiveness of the CBN’s strategic interventions in the FX market. Market analysts have pointed to the improved price discovery mechanism facilitated by the Bloomberg BMatch platform as a catalyst for increased confidence among market participants.

Traders have reportedly responded positively to the automated system, which reduces discrepancies in pricing and enhances liquidity.

The resultant reduction in speculative trading has contributed to the stabilization of the Naira in both official and unofficial markets.

The CBN’s decision to mandate the Bloomberg BMatch system is seen as part of broader efforts to restructure Nigeria’s FX market and improve its integrity.

Prior to this, the market had been plagued by volatility and inefficiencies, leading to significant disparities between official and parallel market rates.

The CBN remains optimistic about the platform’s potential to sustain the Naira’s recovery. By enhancing transparency and fostering greater market discipline, the central bank aims to position Nigeria’s FX market as a model of efficiency in the region.

While the gains recorded so far are encouraging, financial experts caution that sustained recovery will depend on consistent policy implementation, adequate FX supply, and effective regulation to curtail market distortions.

As the Bloomberg BMatch platform continues to gain traction, the Naira’s recovery signals a positive turn for Nigeria’s FX market.

The CBN’s commitment to innovative solutions and stringent regulatory measures highlights a renewed focus on stability and investor confidence.