The naira strengthened against the United States dollar across Nigeria’s official and parallel foreign exchange markets on Tuesday, narrowing the gap between the two segments as trading activity in the official market declined sharply.
The local currency appreciated to N1,387 per dollar in the parallel market, compared with N1,390 recorded on Monday, representing a N3 gain.
Similarly, the naira appreciated at the Nigerian Foreign Exchange Market (NFEM), with the indicative exchange rate standing at N1,322.90 per dollar.
Data from the Central Bank of Nigeria showed that the rate moved from N1,320 per dollar on Monday to N1,322.90 on Tuesday, representing a movement of N2.90.
The latest development further reduced the disparity between the official and parallel markets.
The margin between both markets narrowed to N64.10 per dollar from N70 recorded on Monday.
The narrowing spread indicates a modest reduction in the difference between the exchange rates obtainable in the two market segments, following the naira’s movements during the trading session.
Official market turnover declines
Despite the naira’s appreciation, activity in the official foreign exchange market weakened considerably.
Interbank turnover at the NFEM fell by 48.07 per cent to $55.6 million on Tuesday, from $107.07 million recorded on Monday.
The sharp decline in turnover came as the official exchange rate continued to trade within a relatively narrower range compared with the parallel market.
Market developments in recent months have remained closely watched by businesses, importers, investors and consumers because movements in the naira-dollar exchange rate have significant implications for the cost of imported goods, production inputs and other dollar-denominated transactions.
The narrowing difference between the official and parallel rates also remains an important indicator for participants monitoring developments in Nigeria’s foreign exchange market.