Naira Falls as USD Demand Surges, Foreign Reserves Hits $41.9bn
The Nigerian local currency, the naira, pulled back against the US dollar (USD) at the official window on Wednesday due to a foreign currency liquidity shortfall at the official window.
The exchange rate depreciated as the Nigeria Foreign Exchange Market (NFEM) witnessed an imbalance between the US dollar volumes supplied and aggregate demand from eligible market participants.
Spot FX rate at the official FX market settled at N1494 per dollar, from N1484 the previous day. Updated FX data from the Central Bank of Nigeria (CBN) showed that the naira touched intraday high of N1498 per dollar before it closed at N1494 on Wednesday.
The local currency market is anticipated to be supported by the CBN, boosting positive outlook on the naira in 2025. The naira has seen significant gain as a results of broader pressure on US dollar in the global forex market.
Nigeria’s gross external reserves increased to $41.899 billion, and analysts anticipated a further surge before the week close. Inflows have been persistent amidst fluctuation in the global prices of crude oil in the commodity market.
The oil market came under pressure as the American Petroleum Institute (API) reports a drop in US crude oil inventory. After rallying for three days, ICE Brent and NYMEX WTI were seen trading lower on Wednesday’s trading session even as the American Petroleum Institute (API) reported large crude oil inventory withdrawals in the US.
Latest data shows that those inventories decreased by 3.4m barrels over the last week, in contrast to the average market expectations of a build of 1.07m barrels. Changes in refined products were mixed, with gasoline inventories falling by 700k barrels, while distillate stocks increased by 1.9m barrels.
The rise in distillate stocks provided mixed signals over energy consumption in the country. The more widely followed EIA weekly inventory report will be released later today.
Meanwhile, recent claims by Ukraine that it attacked the Saratov refinery in its latest strike on Russian energy facilities might help create a floor for oil prices at lower levels.
The Saratov refinery (located in the Volga region) has a design processing capacity of about 140k barrels of crude a day. It is also one of the major suppliers of gasoline and diesel to the European part of Russia.
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