Favour's blog

The Central Bank of Nigeria (CBN) has reported that the currency in circulation reached an all-time high of N4.8 trillion as of November 2024. This marks a significant 7% increase from the N4.5 trillion recorded in October. Data from the CBN reveals that currency outside banks also surged, rising from N4.2 trillion in October to a record-breaking N4.6 trillion in November. This reflects an increasing preference among Nigerians to hold cash outside the banking system. Currency in circulation, which represents the physical cash used for transactions between consumers and businesses, has grown consistently throughout 2024. Starting the year at N3.65 trillion in January, over one trillion naira was added to the cash in circulation by November. The trend has been attributed to Nigeria's expanding money supply, which economist Dr. Paul Alaje links to inflationary pressures. Speaking on the matter, Alaje explained, “Money supply is expanding, but this is an offshoot of the CBN’s devaluati...

The naira has continued its volatile journey in Nigeria's foreign exchange market, with significant fluctuations observed in the parallel market. On Tuesday, December 10, 2024, the naira depreciated further, closing at N1,685/$1, marking a N45 or 2.7% decline compared to the previous day's rate of N1,640/$1. This marks the second decline since the Central Bank of Nigeria (CBN) transitioned to the Enhanced Foreign Exchange Market System (EFEMS) on December 2, 2024. Recovery in the Official Market While the parallel market witnessed the naira's depreciation, the official market showed a different trend. The naira gained in the EFEM market, closing at N1,525/$1 on Tuesday, up from N1,538.5/$1 on Monday, reflecting a N13.50 or 0.88% appreciation. The intra-day high for the official market was N1,560, with the low at N1,500. Despite this recovery in the official market, the gap between the official and parallel rates has widened, now standing at N160, up from the previous N101...

The naira has experienced a dramatic recovery against the dollar, gaining 8.9% in just one week, from N1,672/$1 to N1,535/$1 by Friday, December 6, 2024. This rapid fluctuation has left some traders and Bureau de Change (BDC) operators uneasy, as they fear the sudden gain may be unsustainable. The surge in the naira's value has been more pronounced in the official market, but the parallel market, where forex is traded unofficially, has seen even more volatility. By the end of the week, the exchange rate had dropped to N1,570/$1 from N1,700/$1 earlier, leaving some speculators scrambling to sell before the currency lost more value. Key Drivers of Naira's Gain The recent strength of the naira can be attributed to the Central Bank of Nigeria's (CBN) launch of a new trading system called the Enhanced Foreign Exchange Market System (EFEMS). EFEMS consolidates various previous exchange windows into one unified system, which is intended to streamline operations and ensure grea...