A recent decision by the Central Bank of Nigeria (CBN) to reject cash deposits in dollars has resulted in the rise of Nigeria’s currency against the US dollar this week. A forex trader, who chose to speak under the condition of anonymity confirmed that the Naira has appreciated from 220 to 218. Although analysts suggested that devaluation might be the best option, the reverse seems to be the case.

Alhaji Aminu Gwadabe who is the president of Bureau De Change Operators noted that large amounts of dollars in the market would cause the Naira to appreciate further at the parallel market this week.

Last week the Naira appreciated against the dollar from 245 to 220 at the parallel market after banks stopped accepting cash deposits of dollar, pound and euro from their customers into their domiciliary accounts. Customers were alerted last week with the condition that dollars can only come in electronically while lenders would continue to receive dollar transfers from other banks.

There has been continuous pressure on the currency as the fall in oil prices and the imbalance between increasing demand for foreign currency and the foreign exchange available, continued to intensify. Over the past year the Naira lost about 15 % against the dollar with an official devaluation in November. It was devalued from N150-N160 to the U.S. dollar to N160-N176 as it battled to preserve macroeconomic stability, while raising serious concerns.

The International Monetary Fund (IMF) subsequently pointed out the need for the implementation of certain reforms. According to IMF, in the course of the consultation, executive directors commended the authorities for development in boosting Nigeria’s economic diversification and for their macroeconomic response to falling export prices.

The Central Bank of Nigeria (CBN) has said it may increase the list of restricted items excluded for funding from the official foreign exchange (forex) market.