Naira Dips in Value as External Reserves Fall
The Nigerian naira dipped in value across the foreign exchange (FX) markets on Tuesday as the shortage of foreign currencies, especially, the United States (USD) dollar persists.
The Naira depreciated against the US dollar by 0.34% to N776.60 at the Investors and Exporters (I&E) windows as demand pressure stayed unabated. FX Data from the FMDQ platform showed that the local currency was exchanged at N773.98 per greenback at the organised market for investors, and exporters earlier in the week.
Still, there is a higher demand for foreign currency from Nigerians than what the country earns via export sales, creating disequilibrium in the FX position that supplies downward pricing of the Naira.
Unfortunately, the country is not pumping more oil for export, barely meeting the OPEC+ quota in years due to weak investment in infrastructure. As a result, external reserves remained under pressure as the country’s oil company swapped oil for foreign loans.
At the parallel market, the local currency saw further demand pressure from the invisible FX users, causing the exchange rates to depreciate by 0.52 to N965 on Tuesday, and then maintaining a wide gap when compared to the official rate.
In the global market, Brent crude rose 0.62% to $95.02 per barrel, while WTI crude gathered more gains by 1.27% to $92.64 per barrel. This comes on the news of the US shrinking supply amid the expectations from major central banks on policy rates this week.
Meanwhile, oil prices continued to climb on Tuesday morning as the EIA predicted a continued slowdown in U.S. shale production, adding to concerns about a tightening oil market.
Data from the Central Bank of Nigeria (CBN) showed that gross external reserves declined to $33.286 billion, thus reducing the ability of the apex bank to support the local currency. In the last 24 hours, the apex bank has debited the gross FX reserves with more than $10 million.
The CBN, in an effort to obtain a market clearing rate, devalued the naira in June. However, it appears the devaluation has gone wrong as the exchange rate gap between the official and the black market continues to widen. Naira Devaluation Deepens Economic Crisis in Nigeria
Last week, Nigeria’s FX reserve maintained its descent this week, as gross reserves dropped by USD 32.87 million week on week close at USD 33.296 billion. #Naira Dips in Value as External Reserves Fall
