'Naira will recover,' World Bank assures as currency gains 23 percent in 1 week to close at N889 to 1 dollar

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The naira gained 23.51 percent against the dollar in one week closing at N889.86 per dollar on the official Investors and Exporter, I&E, window on Friday, December 15.

According to data from the FMDQ Securities Exchange, this represents a N209.19 gain from the all-time official low of N1,099.05 per dollar it fell to a week before.

On Friday, December 8, the naira fell to an all-time low to cap what has been a turbulent couple of months for the Nigerian currency.

The N1,099.05 per dollar is the lowest rate the naira has officially closed since the Central Bank of Nigeria, CBN, adopted the I&E window as the official trading channel for the naira. On Friday, the naira opened trading at N901.12 to a dollar before closing at N889.86 to a dollar.

The local currency, despite its recovery, is not out of the woods yet with dollar shortages persisting in the country.

Recently, the World Bank disclosed that since May 2023, the naira has depreciated by 41 percent in the official market and by 30 percent in the parallel market.

This, according to the CBN, led to higher cost of importation and partly contributing to elevated levels of inflation which rose to 28.20 percent as of the end of November 2023.

The World Bank in its December 2023 Edition of the Nigeria Development Update, however, expressed confidence that the naira will recover when it said, "Similarly, while the depreciation of the naira contributes to short-run inflation, over time a more transparent, market-reflective, and flexible exchange rate, underpinned by monetary policy tightening, is also likely to be more stable, thereby easing the pressures on inflation."

Pressures the naira is facing in the market has been linked to backlogs of foreign exchange contracts, and the CBN has recently begun to clear these contracts.

Olayemi Cardoso, the CBN governor, while speaking on the issue of volatility recently, disclosed that the apex bank is working to minimise the volatility of the naira against the dollar.

He noted that the CBN is into a comprehensive look at all its different foreign exchange policies in the past in a bid to rethink its foreign exchange approach.