The naira appreciated against the United States dollar at the parallel market on Monday to 217, from 221 recorded on Friday.
The naira rose on the back of weak demand for the dollar at the foreign exchange markets.
Forex traders linked this to an improved dollar liquidity occasioned by the sustained sales of the greenback by the Central Bank of Nigeria.
Reacting to the rising fortune of the local currency, the Acting President, Association of Bureau De Change Operators, Alhaji Aminu Gwadabe, said, “The market has started feeling the effect of the dollar sales by the central bank in the last two weeks and tight measures introduced to prevent cross boarder currency trafficking.”
The CBN had increased the frequency of dollar sales to the BDC operators two weeks ago to twice-weekly from the usual once a week previously in a move meant to increase liquidity in the market and support the local currency.
Traders said bank customers were no longer willing to hold dollars after the central bank banned dollar cash deposits into domiciliary accounts.
“We expect to see more rallies in the market if the central bank could sustain its support for the naira,” Harrison Owoh, a bureau de change operator said, Reuters reported.
The naira was unchanged at the official interbank market at 197 to the dollar, where the CBN has maintained a tight control by pegging it to the rate of 197 to the dollar
The naira had weakened on the parallel market to as much as 245 to the dollar last month, on persistent dollar demand after central bank limited importers’ access to dollars on the official interbank market to buy a wide range of goods, in order to save the external reserves.
The local currency later rebounded to 216 at the parallel market as Deposit Money Banks started rejecting cash deposits in dollars a few weeks ago.
The naira had, however, weakened to about 223 last week before rising to 217 on Monday
Analysts expect the naira to continue rising, saying it is good for the economy.
The Head, Investment and Research, Afrinvest West Africa, Mr. Ayodeji Ebo, had said that the gains made by the naira was good for the economy, adding that it would help the CBN to gauge the true value of the currency in the event of a possible devaluation in the near future.
“If there is a convergence between the interbank and parallel market, the CBN may possibly review its restrictions imposed on the forex market,” he added.
A currency analyst at Ecobank Nigeria, Mr. Kunle Ezun, said if the trend continued, the naira might rise to as much as 200 against the dollar.
Source: The Punch