Naira Appreciates as Data Shows FX Market Inflow Grows by 94%
The Nigerian local currency made a slight comeback against the dominant US dollar in the foreign exchange (FX) market on Tuesday, gaining 15 basis points to close at N1,594, according to data from the FMDQ platform.
In contrast, the naira depreciated by 0.31% to close at ₦1,610 per US dollar in the parallel market as demand for invisible FX payments increased..
In its mid-year economic report, Coronation Research revealed that US dollar inflows into autonomous FX market rose by 94.44% between first half of 2023 and equivalent period in 2024.
The apex bank contribution was less than 9%, while non-bank corporate players made highest contribution in the supply side, followed by foreign portfolio investors, and the exporters.
The exchange rate outlook remains dicey, with some analysts hoping to see the local currency strengthen with FX inflows and sizeable net balance in external reserves.
Nigeria’s economic landscape reflects both challenges and opportunities. The nation’s gross domestic product grew by 3.19% in the second quarter of the year despite structural issues like inflationary pressures, currency depreciation, and low agricultural productivity.
However, the oil sector’s recovery, driven by reforms, offers optimism, Coronation Research said in its mid-year economic report recently published.
The firm said exchange rate could stabilize within the N1,350 – 1,600 range, contingent on increased FX inflows from Foreign Portfolio Investors and the expected US$2.3 billion World Bank loan.
The firm said the substantial public debt burden, now at N121.6 trillion, underscores the urgency of fiscal consolidation and strategic debt management to mitigate further currency and inflationary pressures.
“The evolving macroeconomic environment presents both risks and opportunities. The persistent inflationary pressures and exchange rate volatility are likely to exert upward pressure on interest rates, affecting borrowing costs and potentially slowing down credit growth.”, Coronation Research said in its report.
“The FX rate is expected to range between N1,450 and N1,600 per USD at both the official window and the parallel market over the three months.
“We see Naira stability in the near term partly due to CBN’s resumption of retail Dutch auction system to mitigate FX demand pressure, increased FX injections from FPIs, and improved oil production”, the report said.
Coronation Research report stated that Nigerian autonomous foreign exchange market recorded an inflow of USD14.65 billion in the first half of 2024, compared with an inflow of USD7.38 billion in the equivalent period in 2023.
The breakdown showed that of the sum, the CBN accounted for 8.7%, FPIs; 29.7%, non-bank corporates; 31.7%, exporters; 23.4%; and others accounted for 6.5% of the inflows.
Crude oil prices fell today, following a surge in the previous session triggered by OPEC member Libya’s decision to halt production and exports. Brent prices dropped by 1.39% to $80.30, while WTI prices fell by 1.58% to $76.18. Gold price also decreased by 0.07% to $2,553.40 per ounce. #Naira Appreciates as Data Shows FX Market Inflow Grows by 94%
