Naira Rises to N1,541 as FX Reserves Hit 2-Year High
The Nigerian naira exchange rebounded against the US dollar, gained about N115 on each greenback traded in the official forex market. The local currency appreciated because demand pressure was well covered by a healthy FX liquidity position at the autonomous foreign exchange market.
Last week, the naira experienced increased volatility this week, hitting a high of ₦1,656.49 per US dollar but closing at ₦1,541.52, resulting in a 0.32% gain week-on-week.
The naira has been volatile since April given the limited FX supply amidst increased FX demand. Weighing the impacts of liquidity shortage, foreign investors switched to cautious mode, and low investor confidence have triggered price actions across the markets.
The naira has faltered against the US dollar due to FX liquidity shortage in the official currency market. Efforts to boost liquidity has not significantly impacts exchange rate as imbalance between US dollar demand and supply remains large.
Afrinvest Limited said activity level at the Nigerian autonomous foreign exchange segment declined as turnover for the week dipped by 45.4% week on week to settle at $727.5 billion last week.
The gross balance in Nigeria’s foreign currency reserve climbed to 2-year high at $37.349 billion seen in Oct. 2022, details from the Central Bank of Nigeria (CBN) movement in reserve revealed.
Nigeria’s net FX reserve is underwhelmingly low when considering borrowing from resident domestic banks and other resident counterparties via the forwards markets. But the Nigerian apex bank has initiated a move to make the forward market inactive, according to a note from Afrinvest Capital Limited.
The investment firm stated that there remain no changes, save the maturity of contracts, given that the CBN has now cleared all non-deliverable forwards (NDFs) open contracts. The move came shortly after the CBN rendered contracts for tenors between one and twelve months inactive in response to reforms in the NAFEM window.
The FX rate is expected to range between N1,450 and N1,600 per US dollar at both the official window and the parallel market over the three months, Coronation Research said in its mid-year economic report.
“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 firm said.
Nigeria still generates about 90% of the country’s export receipts from crude oil and gas exports. Based on the market dynamics, analysts projected gross reserves to cross $40 billion in 2024 after the Federal Government puts revenue from the privatized state oil company’s revenue under the CBN watch.
The market spotted improved FX inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM), underpinned by increases in both local and foreign sources. Last month, total inflows at the official forex market rebounded by 21.4% month on month to US$2.34 billion in August from US$1.92 billion posted in July.
Inflows from local sources increased by 15.5% month on month to US$1.94 billion in August from US$1.68 billion in July, driven by increased collections from Individuals (+162.5), Exporters (+28.3%) and Non-Bank Corporates (+18.7%) segments despite the weaker inflow from the CBN (-53.7%).
At the same time, inflows from foreign sources increased by 62.1% in August to US$394.50 million from US$243.30 million, although remained below the H1-2024 average of US$790.57 million, reflecting still weak foreign investor confidence. #Naira Rises to N1,541 as FX Reserves Hit 2-Year High NGX Expands By N455bn as Investors Bet on Value Stocks
