Nigeria: Naira Strengthens as Nigeria Records 16th Consecutive FX Receipt

The Nigerian naira experienced an uptick in value following a series of recent downturns in the foreign currency market, attributed to a sustained increase in gross external reserves. Data from the FMDQ Securities Exchange indicates that the naira regained ground against the US dollar, settling below N1460.

Previously, the local currency had depreciated to N1520 due to challenges in FX liquidity, reversing previous gains. The persistent demand for the US dollar, driven by the import-heavy nature of the Nigerian economy, has raised questions about the effectiveness of the willing seller, willing buyer foreign exchange model adopted by the Central Bank of Nigeria (CBN).

FX analysts continue to highlight the significance of foreign currency liquidity as a key factor driving naira appreciation in currency markets. The apex bank faces considerable challenges in managing both supply and demand dynamics in the FX spot rate movement.

Recent updates on the Nigerian currency show a noteworthy 4.04% appreciation of the naira against the US dollar, closing at ₦1,459.02 in the official market. However, the informal market witnessed persistently high pricing of the local currency due to delays in FX auction sales to currency traders. In this segment, the naira closed at ₦1,515 against the US dollar, according to market reports.

On Tuesday, foreign currency inflows contributed to a rise in the gross external reserves balance to $32.555 billion, marking the 16th consecutive FX inflow. This surge follows a decline to $32.106 billion on April 19. Analysts attribute these inflows to remittances from Nigerians in the diaspora and potential excess receipts from NNPC crude oil swap deals. The nation’s foreign reserves have steadily increased since the CBN suspended FX sales to Bureaux de Change operators (BDCs).

In the global commodity market, oil prices experienced a decline, with Brent crude falling by 0.86% to $81.67 per barrel, and West Texas Intermediate (WTI) crude dropping by 0.89% to $77.33 per barrel on Wednesday.