Following a significant decline at the start of the week, the pressure on the Naira eased somewhat in the official foreign exchange market due to a somewhat better US dollar supply. After breaking the red line on Monday, the currency rate at the Nigerian independent foreign exchange market increased by 2.30% per day to close below N1500.
The spot rate dropped from N1,534.39 to N1,499.07 per US dollar the day before, according to the FMDQ platform. The Naira finished at N1,520 versus the US dollar on the parallel market. The difference between official and parallel market rates has shrunk to N21 because to the official window’s appreciation in currency rates.
According to an update from Agusto Ratings, an external imbalance issue is at the heart of Nigeria’s currency dilemma that underpins an FX illiquidity challenge. This has been exacerbated by the distortionary impact of hoarding, stockpiling, and panic buying.
The CBN’s efforts at improving transparency in the FX market in addition to the near convergence of the official and parallel market exchange rates raise the potential for a recovery of the naira if and when the backlog is cleared, the rating firm added.
Nigeria’s foreign reserves however at $33.3 despite increased oil output. Nigeria’s oil output rose month-on-month to 1.43 million barrels per day, bpd in January 2024, from 1.34 million bpd recorded in December 2023. Naira Steadies as Banks Issue Update on FX Purchase
This translates to an increase of 6.9 per cent as federal government continue to invest in the nation’s oil assets. On yearly comparison, output rose by 15.6 per cent to 1.43 million bpd in January 2024, from 1.23 million bpd recorded in the corresponding period of 2023.
The output excludes condensate, a light crude, which Nigeria can produce between 300,000 bpd and 400,000 bpd, according to the Monthly Oil Market Reports, MOMRs of the Organisation of Petroleum Exporting Countries, OPEC.
In the global commodity market, WTI crude futures advanced by 0.56% to $77.35 per barrel on Tuesday. Also, the Brent Crude increased by 0.29% to close at $82.24 per barrel.
