Naira

Nigeria’s Naira Dips 5.3% Against Dollar, Raises Concerns Over Reserve Levels

Published

6 months ago

April 24, 2024

Nigerian Naira depreciated by 5.3% against the US dollar as concerns over declining foreign reserves raise questions about the central bank’s ability to sustain liquidity.

The local currency has now declined for the third consecutive day since the Naira retreated from its three-month high on Friday shortly after Bloomberg pointed out that the Naira gains were inversely proportional to foreign reserves’ growth.

According to data from Lagos-based FMDQ, the naira’s value dropped precipitously, halting its recent impressive performance.

The unofficial market saw an even steeper decline of 6%, extending the currency’s retreat over the past three trading days to a staggering 17%.

Abubakar Muhammed, Chief Executive of Forward Marketing Bureau de Change Ltd., expressed concerns over the sharp decline, highlighting the insufficient supply of dollars in the market.

Muhammed noted that despite a 27% increase in traded volume at the foreign exchange market on Monday, the supply remained inadequate, forcing the naira to soften further while excess demand shifted to the unofficial market.

The dwindling foreign exchange reserves have been a cause for alarm, with Nigeria’s gross dollar reserves steadily declining for 17 consecutive days to reach $32 billion as of April 19, the lowest level since September 2017.

This worrisome trend has raised questions about the adequacy of dollar inflows to rebuild reserves, especially after the central bank settled overdue dollar obligations earlier in the year.

Samir Gadio, Head of Africa Strategy at Standard Chartered Bank, pointed out that while the naira had been supported by onshore dollar selling, the rally was likely overextended.

Gadio warned that the emergence of a dislocation in the market, with domestic participants selling dollars at increasingly lower spot levels was unsustainable and necessitated a correction.

The central bank’s efforts to stabilize the naira have been evident with interventions aimed at improving liquidity.

However, the effectiveness of these measures remains uncertain, particularly as the central bank offered dollars to bureau de change operators at a rate 17% below the official rate tracked by FMDQ.

Analysts, including Ayodeji Dawodu from Banctrust Investment Bank, foresee further challenges ahead, predicting that the naira will likely stabilize around 1,500 against the dollar by year-end.

Dawodu emphasized the importance of stabilizing the currency to attract strong foreign capital inflows, underscoring the significance of sustainable monetary policies in Nigeria’s economic recovery.

As Nigeria grapples with the repercussions of the naira’s depreciation and declining foreign reserves, policymakers face mounting pressure to implement measures that ensure stability and foster confidence in the economy.

The road ahead remains uncertain, with the fate of the naira intricately tied to Nigeria’s ability to address underlying economic vulnerabilities and bolster investor trust.

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Samed Olukoya

Is the CEO and Founder of Investors King Limited. He is a seasoned foreign exchange research analyst and a published author on Yahoo Finance, Business Insider, Nasdaq, Entrepreneur.com, Investorplace, and other prominent platforms. With over two decades of experience in global financial markets, Olukoya is well-recognized in the industry.

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Naira

Naira Weakens to N1,706 Per Dollar in Black Market, Sells N1,654 Officially

Published

11 hours ago

October 24, 2024

Iyanuoluwa Martins

The Naira weakened to N1,700 against the United States Dollar on the black market on Wednesday and extended this outcome further in the official foreign exchange (FX) market.

In the black market, the Naira lost N12.63 or 0.75 percent against the greenback to close at N1,706.43 to the US Dollar compared to N1,693.80/$1 it closed on Tuesday.

The Naira also fell by 0.06 percent on the US Dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM) extending the weakening of the local currency which started earlier in the week

The local currency exchanged for the US Dollar at N1,654.09/$1, sliding by N1.07 versus N1,653.02/$1 that it closed at the previous session on Tuesday.

The FX market has been volatile as recent efforts to bring some stability to the market through a series of auctions held by the Central Bank of Nigeria (CBN) for official dealers and Bureau de Change (BDCs) have not been able to tackle high seasonal demand.

With the year entering into the last two months, high demand has returned to the market and all eyes will be on what the CBN will do in that regard.

Data showed that there was a decrease in daily supply as the midweek turnover published on the FMDQ Group website stood at $136.68 million indicating that the session’s turnover made a 22.4 percent slide, indicating that there was a drop of $39.47 million compared to $176.15 million that was published in the last trading session.

The Naira also witnessed drops against the Pound Sterling and the Euro. It declined N9.86 on the British currency to wrap the session at N2,147.22/£1 from N2,137.36/£1 that it sold at the previous session.

In the same trend, against the Euro, the Nigerian currency dropped N9.67 and closed at N1,789.93/€1 versus N1,780.26/€1.

The Naira also dropped in its value against the British currency in the black market as it fell by N8.86 to sell at N2,212.37/£1 compared with the preceding session’s N2,203.51/£1 and followed the same pattern against the Euro as it depreciated N5.71 to quote at N1,844.79/€1 versus the previous day’s rate of N1,839.08/€1.

Meanwhile, the local currency further depreciated N3.54 to close at N1,233.01 per Canadian Dollar, compared to Monday’s N1,226.55 per CAD.

Naira

Naira Strengthens in Parallel Market Amid Official FX Depreciation

Published

1 day ago

October 23, 2024

Iyanuoluwa Martins

The Naira closed strong in the parallel market but weakened further in the official foreign exchange (FX) market as seasonal demand continued to affect the currency despite the fresh sale of FX by the Central Bank of Nigeria (CBN).

In the parallel market, the Naira gained N5.17 against the greenback to close at N1,693.80 to the US Dollar compared to N1,698.97/$1 it closed on Monday.

However, the Nigerian Autonomous Foreign Exchange Market (NAFEX), which serves as the official foreign exchange market, showed the Naira recorded a 3.1 percent depreciation against the US Dollar to N1,653.02.

At the previous session on Monday, the Naira closed lower at N1,603.16/$1, indicating a further decrease of N49.86 at the approved market.

A turnover of $176.15 million was on record at the market, according to data from the FMDQ Securities Exchange Limited. This indicated a $183.07 million or 50.9 percent decline versus the $359.22 million quoted recently.

The Naira also gained in its value against the British Pound Sterling in the official market by N9.73 to sell at N2,203.51/£1 compared with the preceding session’s N2,213.24/£1 and followed the same pattern against the Euro as it appreciated N6.21 to quote at N1,839.08/€1 versus the previous day’s rate of N1,845.29/€1.

Meanwhile, the local currency depreciated 74 Kobo to close at N1,226.56 per Canadian Dollar, compared to Monday’s N1,225.82 per CAD.

At the official market, the Naira witnessed gains against the British Currency and the Euro in the Tuesday session.

On the Pound Sterling, the local currency made a gain of N16.54 to wrap the session at N2,137.36/£1 from N2,153.90/£1 that it sold at the previous session and against the Euro, the Nigerian currency closed at N1,780.26/€1 versus N1,791.06/€1, indicating an N10.80 appreciation.

The CBN has not injected fresh FX sales into the market for yet another week after it promised to always prop the market.

Speaking in the US on Tuesday at the ongoing International Monetary Fund (IMF)/World Bank summit, the Nigerian Minister of Finance, Mr Wale Edun noted that Nigeria needed to boost its oil production to fix its FX issues.

“The key about the foreign exchange market really is supply and as you know we are an oil-producing country, we just need to get our oil production up and that will deal with that issue of foreign exchange supply and pressure on foreign exchange anytime there are large flows.”

Naira

Naira Weakens Against Dollar at Official, Parallel FX Markets

Published

2 days ago

October 22, 2024

Iyanuoluwa Martins

The Naira depreciated at the Nigerian Autonomous Foreign Exchange Market (NAFEM) and the parallel market on Monday, signifying more worries for the local currency.

At the official market – NAFEM – the local currency sold for the US Dollar at N1,603.16/$1 as it recorded a 0.15 percent or N2.38 drop versus N1,600.78/$1 it was valued at the previous session on Friday.

This occurred as supply rose at the opening session as turnover published on the FMDQ Group website stood at $359.22 million indicating that the session’s turnover went higher by 2.4 percent or $8.50 million compared to $350.72 million that was published the day before.

At the unofficial market, the domestic currency closed at N1,698.97 to the US Dollar, a drop of N8.15 compared to N1,690.82/$1 it closed during the Friday trading session.

The weakening of the Naira is happening as the nation’s external reserves continue to swell due to lower US Dollar volume sales to boost liquidity in the official FX market.

Latest data showed the balance in Nigeria’s foreign reserves inched to about $39 billion as CBN data revealed that Nigeria now has $38.992 billion as gross balance in the nation’s external reserves.

The CBN has not made do with its promise to prop up the market as it appears to have halted its weekly FX sales

In a different trend, the domestic currency witnessed a flat outcome against the British currency and the Euro in the week’s opening session.

On the Pound Sterling, the local currency closed at N2,153.90/£1 and N1,800.79/€1 on the Euro.

In the parallel market, the local currency depreciated in its value against the British Pound Sterling by N11.69 to sell at N2,213.25/£1 compared with the preceding session’s N2,201.56/£1 and followed the same pattern against the Euro as it lost N10 to quote at N1,845.29/€1 versus the previous day’s rate of N1,835.29/€1.

The local currency also depreciated further by N8.64 to close at N1,225.82 per Canadian Dollar, compared to Friday’s N1,217.18 per CAD.