Nigeria’s External Reserves Bump after 4-Week Jumps
Nigeria’s foreign exchange reserve bumped after gaining traction for four weeks amidst pressures in the global crude oil market. Having stagnated for a long, the gross external reserve has been ascending lately due to improved crude oil production volume and above 2023 budget benchmark market price.
Data from the Central Bank of Nigeria (CBN) revealed that the gross external reserve position fell by USD44.39 million to close at USD33.4 billion. Accretion into external reserve has been unimpressive despite large hydrocarbon sales.
Analysts said export receipts have been limited due to swap and forward obligations in various deals closed by government agencies to support Nigeria’s weak fiscal performance over the years.
MarketForces Africa gathered that a large part of the export receipts or proceeds from oil are redirected for repayment of loans obtained from external sources.
Meanwhile, the authority is expecting FX inflow worth $10 billion from an undisclosed source(s) as per Wale Edun, finance minister recent speech.
Also, there is a $3 billion oil for loan deal sealed with the African Export-Import Bank, apart from $1.5 billion loans obtained from a multilateral lender – World Bank.
The apex bank has reduced its interventionist stance in the foreign exchange market after the devaluation of the local currency in June 2023. Prior to that, FX market intervention had dropped significantly below the pre-pandemic period as a result of the US dollar shortage.
At the investors and exporters FX window, the volume of US dollars transacted decreased by 7.4% to USD545.89 million as of Thursday, according to Cordros Capital Limited.
Analysts noted that trades were consummated within the N700.00 – N1,100.00 while the exchange rate worsened in the forward market. In the forwards market, the rate declined across the 1-month 3-month 6-month and 1-year contracts.
“Looking ahead, we expect FX liquidity conditions to improve slightly, albeit still frail relative to historical levels, as it appears the CBN has regained its momentum regarding FX reforms”, Cordros Capital said in its update.
If the recent convincing actions by the policymakers to turn the tide are sustained, analysts said they expect the local currency pressures to ease.
Cordros Capital said nonetheless, it expects foreign investors to be keenly watching the development in the FX space with regard to the expected inflows as guided by the authorities, CBN’s recent actions in clearing its FX backlogs, and firm direction of short-term interest rates. AfDB Ready to Disburse $618m to Nigeria For Digital and Creative Enterprises
