Naira Rebounds, Sustains Gains Against Dollar After New Trading System Launch

Naira strengthens against the dollar, maintaining its upward trend following the introduction of Nigeria’s new trading system. Get insights into the economic impact.

Over the past five days, the naira has experienced significant gains, driven by Nigeria’s successful $2.2 billion Eurobond issuance and the implementation of the Central Bank of Nigeria’s (CBN) Electronic Foreign Exchange Matching System (EFEMS).

In a related update, the National Bureau of Statistics (NBS) reported yesterday that the country’s total merchandise trade reached N35.16 trillion in the third quarter of 2024, up from N31.89 trillion in the preceding quarter.

The Gradual Appreciation of the Naira

In the official foreign exchange market, data from the CBN showed a consistent strengthening of the naira against the dollar over this week. It began at N1,662.77/$1 on Monday and appreciated to N1,644.78/$1 by Tuesday. By midweek, it had further increased to N1,613.86/$1 and traded at N1,587.29/$1 on Thursday before closing Friday at its strongest in weeks—N 53393 / $3; an impressive five-day upward trend resulting not only into cumulative gain but also part reason reflecting global optimism:6%, which translated (as opposed total value) up nearly eight percent either way you slice or dice numbers depending how technical one’s math goes potentially 😉

Likewise, the parallel market experienced positive momentum. After remaining around N1,745/$1 for a month, the naira appreciated to N1,720/$1 on Tuesday. By Wednesday, it had strengthened to N1,670/$1 and continued its upward trend by reaching N1,640/$1 on Thursday and ending the week at N1,590/$ This amounted to a five-day gain ofN155 .

Issuing Eurobonds Enhances Confidence

Earlier this week, the Debt Management Office (DMO) successfully raised $2.2 billion via Eurobonds, consisting of $700 million in 6.5-year notes at a rate of 9.625%, and $1.5 billion in 10-year notes with an interest rate of 10.375%. The issuance drew substantial interest, amassing an order book totaling $9 billion with investors from North America, Europe, Asia, the Middle East, and Nigeria taking part.

Patience Oniha, the Director General of the DMO, characterized the results as evidence of investors’ confidence in Nigeria’s economic strategies and careful fiscal management. She emphasized the strong reaction from international investors and reaffirmed the agency’s dedication to upholding transparency and actively engaging with global capital markets.

New Forex System Promotes Openness

The launch of EFEMS, timed to coincide with the Eurobond issuance, bolstered support for the naira. This system is run via Bloomberg’s BMatch platform and allows licensed dealer banks to anonymously submit and match foreign exchange orders, promoting transparency and improving market discipline.

CBN Governor Olayemi Cardoso called EFEMS an essential part of the central bank’s plan to stabilize the foreign exchange market and enhance investor confidence. The platform, designed to eliminate distortions and promote market-driven pricing, has been enthusiastically received by market participants.

Improvement in Trade Performance

According to the NBS, Nigeria’s total merchandise trade in the third quarter of 2024 amounted to N35.16 trillion, up from N31.89 trillion in the second quarter. This marks an increase of 81.35% compared to the same period in 2023. The trade balance stayed positive at N5.81 trillion, representing a growth of 43.60% over the previous quarter.

Exports made up N20.48 trillion, or 58.27% of the total trade value, with crude oil leading the way by contributing N13.41 trillion—65.44% of all exports—and non-crude exports amounting to N7.08 trillion in value. Imports reached a total of N14.67 trillion and accounted for 41.73% of overall trade activities.

Major Export Markets

Spain continued to be Nigeria’s leading export destination, with exports valued at N2.26 trillion or 11.07% of the total, followed by the United States (N1.68 trillion), France (N1.58 trillion), the Netherlands (N1.43 trillion), and Italy (N1.37 trillion). Together, these five countries constituted 40.79% of Nigeria’s total exports in Q3 2024.

In terms of regions, Europe was the top destination for Nigeria’s exports, receiving N9.23 trillion or 45.07% of the total share. This was followed by Asia with exports valued at N5.18 trillion and America at N3.37 trillion. Exports to Africa amounted to N2.48 trillion, out of which ECOWAS countries contributed N1.54 trillion.