The Central Bank of Nigeria (CBN) has reinforced its commitment to transparency and stability in the foreign exchange market with the successful implementation of the Nigeria Foreign Exchange Code (FX Code).
This decisive move has not only curbed market distortions but also triggered a sustained rally in the naira, dealing a heavy blow to currency speculators who once thrived on volatility.
The naira, which had faced significant depreciation due to speculative trading and hoarding, has seen a remarkable turnaround in recent weeks.
Analysts attribute this resurgence to renewed investor confidence spurred by the CBN’s enforcement of ethical market conduct, which has effectively dismantled manipulative practices within the FX ecosystem.
The Governor of the CBN, Olayemi Cardoso, explained that the FX Code is designed to uphold fairness, transparency and efficiency.
He outlined six core principles guiding the new policy as ethics, governance, execution, information sharing, risk management and compliance as well as confirmation and settlement processes.
Market Confidence Restored
Market watchers note that the introduction of the FX Code has injected a new sense of order into Nigeria’s foreign exchange system.
The policy’s impact is evident in the growing strength of the naira, both in the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the parallel market.
According to analysts from Cordros Securities, the naira appreciated by 3.8% in a single week, reflecting the success of the CBN’s policy shift.
Managing Director of Afrinvest West Africa Limited, Ike Chioke, further noted that the currency gained 4.3% month-on-month against the dollar with the parallel market rate appreciating by nearly 2% to ₦1,560/$1.
“In the new month, we expect the naira to remain on a positive trajectory bolstered by CBN’s effort at currency stability,” Chioke stated in an email to investors.
Speculators Face Heavy Losses
For FX speculators, the tide has turned dramatically. Many who hoarded dollars in anticipation of further depreciation are now scrambling to offload their stockpiles as the naira continues its upward trend.
Traders who previously thrived on currency fluctuations are now counting heavy losses.
“We are happy the naira is stabilising at both the official markets, but sad over capital losses. This is not the time to hoard the dollar because the naira is fast finding its feet,” said Abdul Abiodun, a forex dealer.
Industry reports indicate that speculators have already lost over ₦10 billion in the ongoing naira rally, with further losses expected as dollar holders rush to liquidate their positions.
The speculative-driven demand that once fueled naira depreciation has been significantly curtailed by the CBN’s stringent regulatory oversight.
Foreign Investors Regain Interest
Beyond restricting speculative trading, the FX Code has attracted renewed interest from foreign portfolio investors (FPIs) and international oil companies (IOCs), both of which are injecting much-needed liquidity into the market.
The CBN’s strategic interventions, including an $18.4 million injection into the FX market, have further bolstered the naira’s resurgence.
President of the Association of Bureaux de Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, hailed the policy’s impact, crediting it with restoring discipline and transparency in FX transactions.
“The FX Code is comprehensively addressing various aspects of market conduct and practice. It is not intended to be exhaustive. The policy authorises the CBN to establish and enforce directives regarding the standards for financial institutions under which FX deals are to be conducted,” Gwadabe noted.
With speculators retreating and confidence growing, analysts project a sustained naira rally in the coming weeks, supported by CBN’s firm commitment to stabilizing Nigeria’s foreign exchange market.
The days of unchecked speculation appear to be fading, ushering in a new era of accountability, efficiency and long-term stability for the naira.
