The naira’s value fell sharply in the foreign currency (FX) market as demand for the US dollar grew due to domestic economic activity. On Thursday, the currency rate weakened on the official FX market, while Nigerian gross external reserves continued to fall, with 10 straight outflows.
The balance of external reserves declined to $36.453 billion, down $419 million from $36.872 billion on August 7, 2024. Though the Central Bank reported that FX inflows to Nigeria reached an all-time high in July, the official currency market is far from stable.
The FX scarcity crisis has held the naira in a cage, fluctuating between N1500 and N1600 at best, with the government maintaining the native currency remains grossly undervalued. In July, the naira depreciated by 6.9% in the Nigerian autonomous foreign exchange window at a rate of N1,608.70 per US dollar on the back of intermittent FX sales to authorised dealer banks.
“The problem is not the naira; there is a dislocation in Nigeria’s economic structure,” analysts told MarketForces Africa in a discussion on Thursday. Nigeria depends strongly on hydrocarbon sales to boost foreign reserves with intermittently favourable net flows from international trade.
After the FX reform, the gap between the official and parallel market exchange rates has collapsed. Lower FX spreads have reduced speculation in the FX market, analysts told MarketForces Africa in a chat, citing the Central Bank of Nigeria’s (CBN) efforts to unify exchange rates.
According to data from the FMDQ platform, the naira depreciated by 2.74%, closing at ₦1,586.11 per US dollar. The weakening of the local currency was aas result of higher demand for foreign currencies, which are not readily available in the currency market.
companies,Some Nigerians, companies and governments prefer to conduct local transactions in foreign currency over growing doubts over the local currency store’s value feature. Meanwhile, the naira held steady at ₦1,600 per US dollar in the parallel market on Thursday.
Demand for foreign currency at the informal currency market was relatively light for the Bureau de Change operators to accommodate. In the global commodities market, oil prices rebounded. MarketForces Africa reported that crude oil prices, which had previously erased most of their yearly gains, were rising due to weakened demand in China and concerns about the U.S. economy.
ICE Brent prices increased by 1.72% to reach $77.36, while US WTI prices rose by 1.75% to $73.19. Meanwhile, gold prices fell by 1.13% to $2,518.70 per ounce.
