Naira strengthens against euro in parallel market amid FX reforms

• Published On: 09 December 2024 at 19:58

The Nigerian naira has shown significant strength against the euro in the parallel market, owing to ongoing foreign exchange reforms and political uncertainty in Europe.

The EUR/NGN exchange rate fell from N1852/€ to N1695/€ on December 2, 2024, reflecting the euro's bearish trend.

The recently implemented Electronic Foreign Exchange Matching System has addressed long-standing issues of market opacity and inefficiency by allowing for seamless trading and promoting uniformity among market participants.

Omolara Duke, the CBN's Director of Financial Markets, referred to the Bloomberg BMatch platform as a "revolutionary tool" for transforming Nigeria's forex market.

Commercial banks and authorised dealers can now use the Electronic Foreign Exchange Matching System to place real-time buy and sell orders.

This system ensures faster trade execution while providing real-time visibility to market participants and regulators, thereby increasing transparency and efficiency in the foreign exchange markets.

The euro has recently come under pressure as a result of France's ongoing political situation, exacerbating its global market challenges.

The euro is getting closer to the critical $1.05 threshold, having fallen more than 3% against the US dollar in the last month.

The situation has been exacerbated by rising political unrest in France, which culminated in a no-confidence vote against Prime Minister Michel Barnier scheduled for last Wednesday night.

The euro remains under pressure as President-elect Donald Trump's tariff threats threaten European exports, particularly in the auto industry.

Meanwhile, the European Central Bank intends to lower interest rates further, despite the fact that many of the region's economies are becoming increasingly reliant on fiscal stimulus to maintain growth.

Historically, December has been the euro's best-performing month against the US dollar, with an average gain of 1.6% over the last 24 years.

The currency has a 71% chance of ending the month in positive territory, the highest of any month.

Meanwhile, the ECB's December meeting will be critical in determining the short-term outlook, with the focus on whether they announce a 50-basis-point or 25-basis-point rate cut.