Naira Lost 27% Amidst Zero Market Intervention in 3-Month
The naira lost more than 27% of its value in the foreign exchange market, beating the expectation that the official rate will worsen to N1000 in 2024. The local currency suffered a setback after climbing against the US dollar but it could not sustain the momentum after the Central Bank of Nigeria (CBN) halted forex market intervention.
Data from the FMDQ platform reviewed showed that Naira depreciated by 27.19% to close at N1,089.51 to the US dollar from N856.57 the previous day. In the parallel market, the Naira closed at N1,239 per dollar. The exchange rate movement has however reduced the gap between official and black market rates.
Devaluation of the Nigerian naira has failed to achieve results as there has been no single market clearing rate since June 2023. However, the decision has provided a false increase in government revenues.
For context, following the over 40.0% naira devaluation by the CBN, FX conversion added about N12.8 trillion to the total debt profile, CardinalStone Partners said in its 2024 economic outlook.
In the global commodity market, West Texas Intermediate crude futures increased by 1.17% to $71.60 per barrel on Tuesday. Also, the Brent Crude closed higher at $76.86 per barrel.
According to Coronation Research, the current gap between the NAFEM and the parallel market rate printed at 41.5% on Friday. Meanwhile, the volume of US dollars transacted at the official market sloped downward as the apex bank halted forex supply.
According to data from FMDQ, NAFEM turnover decreased by -26.0% or -USD107.1 million to USD305.1 million on Friday. Analysts said in an update that the NAFEM window recorded an inflow of USD15.3 million as there were no injections made by the CBN for the eleventh consecutive week.
Data however showed that foreign portfolio investors (FPIs) accounted for 38.7%, non-bank corporates accounted for 33.7%, exporters accounted for 7.4%, and others accounted for 20.2%. Nigeria’s external reserves increased by +0.3% to close at USD33 million, providing seven months of import cover.
