Naira Jumps on $10bn FX Inflow Expectation
The Nigerian naira appreciated by 1.9% to N793.34 against the United States (US) dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) amidst a $10 billion foreign currency inflow that is expected to hit the economy in the coming weeks.
Nigeria is expecting an influx of $10 billion FX within the coming weeks, Finance Minister Wale Edun said during the Nigerian Economic Summit in the capital, Abuja, on Monday. Reacting, the FX market experienced a favourable balance between FX supply and demand at the official window.
This boosts optimism as traders anticipate that the apex bank would have a healthy buffer to offset the forex backlog owed to foreign investors estimated at about $10 billion. The exchange rate had plunged to N808.27 per greenback on Friday.
Elsewhere in the parallel market, the local currency lost weight further as demand pressure bit harder amidst tight supply, closing at a new low of N1,210 against the US dollar. The government has now signalled a plan to ban forex trading across the streets.
“A call to outlaw bureau de change operation not impossible as Nigeria continues to search for market clearing rate gets tougher”, research analysts at LSintelligence Associates told MarketForces Africa in a chat.
Data from the Central Bank showed that the balance in the external reserves climbed despite a bearish performance in the oil market. On Monday. Brent crude is down 1.09% to $91.15 per barrel. Similarly, West Texas Instrument (WTI) crude fell by 1.06% to $87.15 per barrel.
The Minister explained that President Bola Tinubu recently signed two executive orders on Thursday to provide support to the currency market, which has been grappling with a persistent decline in value due to chronic shortages of the US dollar.
Under these orders, the government will permit the issuance of financial instruments in foreign currency domestically and facilitate the transfer of cash held outside the banking system into banks.
Meanwhile, the seemingly large FX inflow into the economy announced by Mr Edun is expected to complement other measures being implemented by the government to alleviate forex market pressures.
Earlier this month, the Central Bank of Nigeria declared the removal of an eight-year ban on 43 items that were previously restricted from accessing foreign exchange. #Naira Jumps on $10bn FX Inflow Expectation Nigeria Eurobond Slumps after CBN Resumes OMO Auction