Nigerian Naira Rises as Country’s Foreign Reserves Top $54bn
The Nigerian local currency unit, the naira, gained value against the US dollar in the official foreign exchange market, closing at N1,321 per dollar on Friday.
According to the daily FX update from the Central Bank of Nigeria (CBN), the spot rate opened at N1337.2872 per dollar, down from N1337.2873.
Effectively, the naira appreciated by 1.22% week-on-week, supported by sustained FX inflow and aided by positive sentiment around the CBN’s external buffer to defend against shocks.
Nigeria’s gross external reserves surpassed the $54 billion mark after a series of FX inflows from across global sources – remittances and hydrocarbon revenue receipts are key drivers.
Elevated oil prices have bolstered the fiscal performance of the top African crude producer.
Crude oil prices extended their upward trajectory during the week and were on course for a sharp weekly gain, as the ongoing conflict in the Middle East heightened concerns over global oil supply disruptions.
Brent crude was trading at $95.55 per barrel, while WTI stood at $91.53 per barrel at the week’s close, with expectations that prices would increase as tensions between the US and Iran extended.
Oil prices remained elevated as Iran and the United States exchanged missile strikes during the week, while Israel’s Defence Minister threatened “crippling” attacks on Iran’s infrastructure, including both military and civilian facilities and energy assets.
Meanwhile, Bonny Light crude increased by 11.12% to $102.54 per barrel, reflecting the broader rally in global crude oil prices.
“We expect the near-term outlook to remain cautiously positive, with the naira likely to retain support from improved FX liquidity, rising external reserves and elevated crude oil prices”, investment firm Cowry Asset Limited said in a note.
Analysts, however, noted that heightened geopolitical tensions are expected to keep oil prices volatile, while sustained high energy costs could add to domestic inflationary pressures.
Overall, stronger oil revenues should continue to support Nigeria’s external position and provide a favourable backdrop for the naira in the near term.
With evolving forex market dynamics favouring the local currency, Broadstreet has become more bullish on the naira outlook; the year-end exchange rate is estimated at N1300.
Naira Gains Value as Nigeria’s Foreign Reserves Reach $53.3bn
