The naira closed stronger yesterday on the parallel market, appreciating to N1,590 per dollar, compared with the N1,610 to a dollar it was the previous day.
The appreciation was the local currency’s notable appreciation since April 8, when it last traded at N1,565/$, on that arm of the forex market. It had been trading around N1,600 to a dollar since then.
However, on the official Nigerian Foreign Exchange Market (NFEM), the naira slipped slightly to N1,554/$, down from N1,545/$ on Thursday. Despite the marginal decline, the gap between the official and street rates narrowed considerably to just N41, down from N70 a day earlier. The trend signals a more balanced market as confidence gradually returns.
Analysts said the appreciation of the naira was being supported by rising foreign exchange inflows and improving investor sentiment.
According to the latest update from Cordros Securities, total inflows into the FX market jumped to $5.96 billion in May, up 62 per cent from $3.67 billion recorded in April.
Most of the inflows, about 83 per cent, came from domestic sources, while foreign sources accounted for the remaining 17 per cent. Still, the increase marks a turning point, after months of tight liquidity and uncertainty in the market.
It stated: “According to the data from FMDQ, total inflows into the Nigerian Foreign Exchange Market (NFEM) surged by 62.0 per cent m/m to $5.96 billion in May, April: $3.67 billion.”
“The improvement was primarily due to a substantial increase in inflows from both local, 83.2 per cent of total inflows and foreign 16.8 percent of total inflows sources.
“In the near term, we anticipate that foreign exchange inflows will continue to improve, supported by growing market confidence. However, the lingering global trade uncertainties remain a downside risk to robust inflows from foreign counterparts, potentially constraining growth in overall FX liquidity,” Cordros stated.