Naira Weakens as Nigeria’s Foreign Reserves Dip Below $52bn
The Naira exchange rate weakened against the US dollar at the Nigerian foreign exchange market (NFEM) on increased demand for international payments and a slowdown in external reserves.
Daily FX data obtained from the Central Bank of Nigeria (CBN) revealed an increase in interbank FX activities by financial institutions, the market makers, with a spike in US dollar volume turnover.
The official rate weakened marginally by 15 basis points (bps) to ₦1,363.70 per US dollar bid, though forex market pressures appear minimal even with a sharp rise in FX activities.
During the trading session, forex transactions were consummated between N1,363 and N1368 per US dollar, reversing intraday rates of N1,359 and N1365.5000 quoted the previous day.
Trading data from the CBN showed that interbank FX turnover rose sharply on the day to $102.954 million on Tuesday, reflecting a 160% surge from $39.587 million recorded during the previous trading session.
Driving the huge US dollar volume turnover on Tuesday, the CBN reported that the number of FX deals at the interbank market advanced to 121 from 55.
The external reserves declined after the CBN FX injections at the currency market last week. The CBN accounted for about 50% of FX inflow to keep the naira stable amidst increased demand for US dollar payments.
Nigeria’s foreign reserves balance declined to US$51.964 billion following three consecutive foreign currency outflows. The nation’s gross external balance hit a 2009 high of $52.036 billion, and then it started declining – the pattern that has been observed in the past.
Oil prices plunged for a second day this week as a pause in the fighting held and hopes increased for the US and Iran to renew talks to end the war.
Brent and US crude prices tumbled. Brent is down nearly 16% in the two days, trading around $83 a barrel. US West Texas Intermediate crude fell below $80, dropping about 12% in two days.
Talk of a renewed peace deal between the US and Iran has helped push oil prices back down after Brent jumped above $100 for the first time since May earlier this month.
President Donald Trump continues to tease talks with Iran while also maintaining that attacks could resume if there isn’t a deal soon.
A pause in the fighting announced over the weekend appeared to hold into this week, and talks between Iran, Saudi Arabia, and Oman about how to get the Strait of Hormuz reopened helped push crude prices down further. #Naira Weakens as Nigeria’s Foreign Reserves Dip Below $52bn# Nigerian Naira Hovers at N1,362 as CBN Drives 50% of FX Liquidity
