In September 2024, the Naira ended at N1,541 on the official NAFEM window. This was a bit better than its performance in July and August 2024.
But, in the parallel market, the Naira wasn’t doing so great. It dropped to N1,700/$ in September—the lowest it had been since February 2024.
At the beginning of September, the official exchange rate on the NAFEM window was N1,585/$. By the end of the month, it had appreciated by 2.77%.
According to Nairalytics data, September’s performance was the strongest since June 2024, when the Naira closed at N1,505/$ on the official window. In July, the Naira settled at N1,608/$ on the official market and N1,600/$ on the parallel market. In August, it closed at N1,598/$ officially and N1,616/$ on the parallel market.
FX Turnover and CBN’s Actions
In terms of daily forex turnover, September had the highest since July 11th, 2024, when it reached $348 million. On September 26th, 2024, daily forex turnover was $334.05 million.
The increase on September 26th happened just after the Central Bank of Nigeria (CBN) announced it would sell $20,000 to Bureau De Change (BDCs) at N1,590/$, allowing for a 1% profit margin. This move aimed to add more liquidity into the forex market after a low turnover the previous day of just over $100 million, with the Naira trading at N1667/$ on the official market—the lowest point that month.
Additionally, the CBN increased interest rates for the fifth time in a row to stabilize the forex market.
Along with a 50 basis point rise in the Monetary Policy Rate (MPR), the bank aggressively tightened its monetary policy. It increased the Cash Reserve Ratio (CRR) for commercial banks by 500 basis points to 50%, and for merchant banks, it went up by 200 basis points to 16%. According to the CBN, this was to tackle the problem of too much money in circulation and its impact on inflation and the forex market.
FAAC Allocation and Foreign Reserves in September
The CBN Governor mentioned a link between the monthly disbursement from the Federation Account Allocation Committee (FAAC) and forex demand pressures. Going forward, the bank will watch future disbursements by the FAAC to understand their impact on prices.
Foreign reserves grew by almost 5% in September, rising from $36.24 billion at the start of the month to $38.058 billion by September 30th, 2024.