Naira Settles at N869 as External Reserves Rise
The Nigerian naira appreciated by 2.89% to close at N869.39 at the Nigeria Autonomous Foreign Exchange Market (NAFEM) as foreign reserves gained traction. FX demand trailed market supply, thus strengthening the local currency.
Analysts expect the exchange rate to fare well in the first quarter of 2024 as the Central Bank of Nigeria (CBN) showed commitment to offset FX backlog with additional payments to foreign airlines.
In contrast, in the parallel market, the Naira depreciated, closing at N1,238 per US dollar. Nigeria’s FX reserves started the year with an accretion as the gross reserve level increased by USD129.82 million week on week to USD33.04 billion.
Total turnover in the market declined by 56.0% as of Thursday to USD169.64 million while trades consummated within the N700.00 – N1,268.00/USD band, according to Cordros Capital.
In the forward market, exchange rates across short-term contracts appreciated amidst hope that more FX inflows would be seen in 2024.
Forward rates on 1-month contracts appreciated by +7.5% to N907.02, 3-month contracts gained 7.0% to N929.47 and 6-month contract rose by 6.1% to N964.05. At the end, forward rate for 1-year contract gained 4.7% to N1,038.50.
In their market update, Cordros Capital analysts said they expect FX liquidity conditions to remain tight, pending receipt of expected FX inflows. Dangote Reacts to EFCC Visit to Headquarters
Analysts expect the pressure on the local currency to persist in the near term. Nonetheless, they expect foreign investors to keenly watch the development in the FX space.
In the global commodity market, West Texas Intermediate (WTI) crude futures advanced by 1.97% to $73.61 per barrel on Friday. Also, the Brent Crude closed higher at $78.87 per barrel.
