The Nigerian naira traded at N741.64 per US dollar in the Investors and Exporters’ foreign exchange market as supply side constraints eased further.
The new spot rate represents a 6.01% increase over the previous day’s official market price of N789.08 for the leading trade currency, the US dollar. As a result, the spread between official and parallel market rates has increased over N100.
Because of a record degree of foreign currency scarcity, the exchange rate has been swinging in both directions since FX reform began in June 2023. According to estimates, the naira would remain undervalued until it trades below N700 per US dollar in the forex market.
Because of this market consensus, FX traders estimated that the naira would regain position after the Central Bank of Nigeria (CBN) settled the FX backlog owed to foreign investors who had sought to upstream funds offshore – right before the devaluation of the local currency.
Forex supply is the only thing holding the local currency back from regaining its true market rate, research analysts at LSintelligence Associates said in a commentary note shared with MarketForces Africa. Bank of America estimated that the naira would appreciate to N680 when devaluation dust settled.
In the parallel market, the Naira experienced a slight depreciation of 0.34% against the US dollar, reaching N875 amidst a sustained decline in the nation’s external reserves. Data from the apex bank showed that FX reserves dropped to $34.94 billion, providing Africa’s largest economy by size of gross domestic product with 6-month import cover.
The tepid accretion into the gross external reserves relates to oil swap deals taken by Nigeria and low production volume – even when prices remain relatively above budget. >>> Naira Devaluation Deepens Economic Crisis in Nigeria
At the close of the market session midweek, Brent crude fell 0.78% to $84.25 per barrel, while WTI crude lost 1.02% to $80.54 per barrel. The two grades had rallied earlier in the morning over a positive demand outlook.
US energy demand is projected to improve following a decline in crude stock.
