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Naira Gains N5 Against the US Dollar on Parallel Market

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Naira Gained Against the US Dollar on the Parallel Market

The Nigerian Naira gained N5 against the United States dollar on Wednesday on the parallel market.

The local currency improved by N5 from N460 it traded on Tuesday to N455 on Wednesday.

However, Naira declined against both the British pound and the Euro Single currency.

Against the British pound, the Naira lost N2 from N555 it traded on Tuesday to N557, while against the Euro single currency its depreciated by N3 from N495 it was exchanged on Tuesday to N498 Wednesday.

On the Investors and Exporters Forex Window, the local currency lost 84 Kobo from N386.33 it was exchanged on Tuesday to N387.17 on Wednesday.

Activity level was largely unchanged as investors and exporters’ total turnover stood at $90.88 million, similar to the $99.9 million recorded on Tuesday.

Despite the Central Bank of Nigeria’s efforts at stabilising the local currency, scarcity amid falling foreign revenue generation continues to impact the Nigerian Naira.

The slight improvement recorded on the parallel market on Wednesday may not be unconnected to the N2.3 trillion stimulus package approved by the Federal Executive Council on Wednesday.

While the inflow of cheap money is likely to boost business sentiment and eventually stimulate growth, low dollar liquidity will continue to weigh on manufacturing and other key sectors that depend on importation for production.

Also, dollar illiquidity will further escalate the nation’s inflation rate given the fact that the nation import over 90 percent of its consumption.

However, the continuous rise in oil prices would support central bank efforts at reining in high forex rates but the huge production cut agreement reached by members of OPEC plus remains Nigeria and other members facing fiscal issues’s concern.

Naira remains under pressure.

Is the CEO/Founder of Investors King Limited. A proven foreign exchange research analyst and a published author on Yahoo Finance, Businessinsider, Nasdaq, Entrepreneur.com, Investorplace, and many more. He has over two decades of experience in global financial markets.

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Naira

Naira Hits Five-Month Low Amid Dollar Demand Surge

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Naira to Dollar Exchange- Investors King Rate - Investors King

Nigeria’s naira extended its losing streak to a fifth consecutive day as it slipped to its weakest level since March despite the Central Bank of Nigeria’s (CBN) interventions.

The naira closed at 1,577.29 per dollar on Monday, down from Friday’s N1,563.8 per dollar on FMDQ.

This decline comes despite the CBN’s efforts to stabilize the currency by injecting $122.7 million through dollar sales into the market.

However, analysts argue that these amounts were insufficient to balance the robust domestic demand for the greenback.

“The CBN has been in the market selling $50 million from time to time, which is not enough,” commented Carlo Morelli, senior portfolio manager at Azimut Investment SA.

Morelli attributes the persistent pressure on the naira to capital outflows and a lack of investor confidence in the currency, despite the central bank’s commendable efforts in tightening monetary policy and reducing naira liquidity.

Central Bank Governor Olayemi Cardoso has aggressively raised interest rates in an attempt to curb inflation and stabilize the naira.

The benchmark borrowing rate now stands at 26.25%, following an increase of 14.75 percentage points since May 2022.

However, the currency has weakened by approximately 70% against the dollar since exchange-rate controls were eased last year.

“Restoring foreign exchange broad confidence is the last step, and the huge volatility in May delayed the return to normalcy,” Morelli added.

“Many foreign investors are still waiting for more evidence of stability before considering Nigeria investable.”

The naira’s decline makes it the second-worst performing currency tracked by Bloomberg in 2024, trailing only the Lebanese pound.

The recent depreciation has been fueled by both seasonal dollar demand and ongoing investor skepticism.

The central bank’s next policy decision, set for July 23, is expected to address these issues. Monday’s data showing annual inflation quickened to 34.2% in June suggests that another rate hike might be on the horizon.

In a bid to bolster the naira, the central bank has increased Nigeria’s foreign exchange reserves to $35 billion as of July 8, the highest level since May 30, 2023.

This boost is attributed to recent loans from the World Bank and the African Export-Import Bank.

Omobola Adu, an analyst at BancTrust & Co. Investment Bank, noted that recent pressure on the naira has also stemmed from corporates and individuals preparing for foreign vacations.

“Boosting the supply of FX into the country remains crucial for the government to alleviate pressure on the naira,” Adu stated.

He suggested that a eurobond or local dollar bond sale later this year, along with increased support from multilateral institutions, could help shore up reserves.

Despite these challenges, Central Bank Governor Cardoso remains optimistic, asserting that the worst of the currency’s volatility is over.

He reiterated this sentiment on Thursday in Lagos, addressing business leaders and highlighting improvements in crude output and capital inflows as positive signs.

Nigeria, Africa’s largest crude producer, relies heavily on oil sales, which account for at least 80% of its export earnings.

The country’s combined crude oil and condensate output rose to 1.5 million barrels per day in June, the highest since February, according to the upstream petroleum regulatory commission.

“While the naira may be undervalued, for the naira to stabilize and perhaps regain ground, large portfolio and capital inflows are needed,” said Samir Gadio, head of Africa strategy at Standard Chartered Plc in London.

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Zimbabwe Urged to End Dollar Dependence, Boost Local Currency

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U.S dollar - Investors King

Zimbabwe must take decisive steps to reduce its reliance on the US dollar and promote the use of its own currency, according to Information Secretary Nick Mangwana.

In an opinion piece published in the Herald newspaper, Mangwana outlined the urgent need for de-dollarization to achieve economic sovereignty, stability, and growth.

“The benefits of de-dollarization far outweigh the costs, making it an urgent imperative for Zimbabwe to break free from the US dollar grip,” Mangwana asserted.

His call comes as more than 80% of the nation’s transactions are currently denominated in dollars, a situation exacerbated by the lifting of a ban on the US currency at the start of the coronavirus pandemic in March 2020.

This move was initially intended to ease an acute shortage of foreign exchange.

Mangwana said reducing reliance on the greenback is a critical step toward regaining economic control.

“De-dollarization will help promote our local currency and diversify the country’s reserves,” he said.

By encouraging the use of the Zimbabwean dollar, the country can work towards stabilizing its economy and fostering sustainable growth.

The push for de-dollarization is part of a broader economic strategy. Last week, President Emmerson Mnangagwa hinted that Zimbabwe’s bullion-backed Zimbabwean dollar (ZiG), its sixth attempt in 15 years to establish a stable currency, may become the sole legal tender before 2030.

This move is seen as a long-term solution to the ongoing currency instability.

Mangwana’s advocacy for de-dollarization reflects a growing consensus among government officials that economic independence is vital for Zimbabwe’s future.

“Reducing our dependence on the US dollar will not be without challenges, but the long-term benefits are undeniable,” he said.

The transition to a more self-reliant economic model is expected to involve significant policy changes and strategic planning to ensure a smooth and effective implementation.

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Forex

Nigeria’s Foreign Reserves Rebound to $35.05bn Under Tinubu Administration

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Forex Weekly Outlook March 6 - 10

Nigeria’s foreign reserves climbed to $35.05 billion as of Monday, according to the latest data from the Central Bank of Nigeria (CBN).

This represents a significant recovery to levels not seen since the early days of President Bola Tinubu’s administration.

The current reserve level represents a return to the $35 billion mark last recorded on June 2, 2023, when it stood at $35.02 billion. A day after President Tinubu’s inauguration, the reserves were reported at $35.09 billion.

Since then, Nigeria’s foreign reserves have fluctuated, frequently falling below the $35 billion threshold.

The reserves dipped to a low of $32.11 billion on April 19, prompting speculation about the CBN’s intervention in the currency market to support the naira.

The naira, which was officially floated on June 14, has lost approximately 70 percent of its value against the US dollar since the market segments were harmonized.

Despite these challenges, the recent rise in reserves indicates a positive trend. In response to concerns about market intervention, CBN Governor Dr. Olayemi Cardoso said the apex bank is committed to a market-driven approach.

“We encourage a willing buyer, willing seller dynamic and aim for minimal central bank intervention, except in very unusual circumstances,” he said during the last IMF Spring meeting.

The Monetary Policy Committee (MPC) of the CBN has also highlighted the importance of improving liquidity in the foreign exchange market.

Personal statements from the committee’s 295th meeting in May, recently published on the CBN’s website, reflect a focus on maintaining a vibrant currency market.

The MPC raised the Monetary Policy Rate (MPR) to 26.25 percent while retaining other policy parameters.

Since the April low, Nigeria’s foreign reserves have appreciated by $2.98 billion, showcasing a significant recovery amidst ongoing economic reforms.

This rebound provides a measure of optimism for the nation’s economic stability, particularly as it grapples with the broader impacts of currency devaluation and inflation.

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