Naira Crashes by 13.3% as FX Reserves Record Second Outflow
The naira, Nigerian local currency, crashed by about 13.3% day on day in the foreign exchange (FX) market on the obvious FX liquidity challenge that has persisted since last month.
Yesterday, the naira gained sharply to settle at N1,173.88 per US dollar at the Nigerian autonomous foreign exchange market.mThe zigzag movement in the exchange rate has doused market expectations that the naira outlook could remain positive amidst growing criticism over the Central Bank of Nigeria FX float idea.
“That permutation would damage the naira the more since Nigeria is a net importer of many things,” analysts told MarketForces Africa, saying there is no way the CBN would draw away from FX market and expect the naira to strengthen.
Meanwhile, accretion into the nation’s external reserves has been paused, with a second outflow recorded between May 24, and May 27, 2024. Gross external reserves saw successive inflows for a month, a pattern some analysts attributed to FX receipts from NNPCL oil sales.
At the time of filing this report, foreign reserves had fallen by $32.70 billion due to two successive outflows amidst the expectation that the apex bank would inject US dollars into the official window after a week’s long absence.
Data from the FMDQ Securities Exchange platform revealed that the Nigerian naira depreciated by 13.27% against the US dollar in the NAFEM window, closing at a rate of ₦1,329.65. The volume of currency traded on Wednesday increased to $336.54 million, up from $328.32 million recorded on Tuesday.
In the parallel market, the naira strengthened by 2.68%, ending at N1,455 per US dollar. Pressure returned to the global commodity market ahead of the OPEC meeting at the weekend. West Texas Instrument (WTI) crude futures and Brent crude prices slid to $79.57 and $83.91 per barrel, respectively. #Naira Crashes by 13.3% as FX Reserves Record Second Outflow
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