Naira Strengthens Despite Decline in FX Reserves

The naira gained value on Tuesday in the Nigeria autonomous foreign exchange market as pressures emanating from high US dollar demand for local manufacturers and importers eased.

The local currency moved strongly against the dominant US dollar at the official market, appreciating by 3.71% to close at N806.73 from N837.77 the previous day.

Analysts are expecting FX tension in the market to ease in December on account of reduced import bills. Some manufacturers would have started tightening their ends with reduced production activities ahead of 2024 plan, analysts told MarketForces Africa.

Data from the Central Bank of Nigeria (CBN) showed that gross external reserve slumped, trending below $33 billion, providing seven months of import cover versus 3 months benchmark. Nigeria Eurobond Slumps after CBN Resumes OMO Auction

Details showed that FX claims that reduced the balance in the nation’s foreign reserves were settled in the first week in December 2023.

The CBN recently offset FX forward backlog to support the naira while it hands off its periodical market intervention for six weeks straight. Nigeria plans to resume foreign currency borrowings with support from lawmakers.

Eurobond borrowing has been paused since March due to increased costs of issuance following US Fed rate hike targeted to stem inflation pressures. In the parallel market, the Naira saw further demand pressure as it depreciated by 0.52% to N1,165 per dollar. 

Elsewhere, oil prices experienced a positive trend on Tuesday, with Brent Crude trading at $78.9 per barrel and WTI at $73.80 per barrel