The naira depreciated further against the US dollar across multiple foreign exchange (FX) markets, as Nigeria’s gross external reserves declined for the third straight day.
Market participants are anticipating further intervention from the Central Bank of Nigeria (CBN), following a $50 million injection the previous day. During Tuesday’s session, the USD/NGN pair traded within a range of ₦1,589.50 to ₦1,595.00.
By the close of trading, the naira had weakened by 44 basis points, settling at ₦1,590.75 per dollar. Analysts at AIICO Capital project that the naira will remain within its current trading band barring any major economic disruptions.
In the parallel market, the local currency fell further to ₦1,620 amid a surge in demand. The CBN’s data showed that external reserves fell to $38.518 billion, down from $38.561 billion recorded last week—marking the third consecutive decline after recent inflows. Analysts attribute the drop to sustained FX market interventions by the central bank.
Despite a wave of FX inflows from exporters, the CBN injected $190 million into the market last week and added another $50 million on Tuesday to stabilize the naira amid dwindling oil revenue.
According to a macroeconomic update by Verto FX, the central bank has been injecting between $50 million and $100 million daily. However, market consensus suggests these interventions are intended more to maintain liquidity than to decisively stabilize the exchange rate.
On the global commodities front, oil prices rose over 1% on Wednesday due to mounting supply concerns. This follows OPEC+’s decision to maintain current output levels and the U.S. ban on Chevron’s Venezuelan crude exports. Brent crude gained 91 cents (1.42%) to reach $65 per barrel, while West Texas Intermediate (WTI) climbed $1.08 (1.77%) to $61.97.
Gold prices remained relatively stable, with spot gold trading at $3,295.43 an ounce as investors awaited the release of minutes from the U.S. Federal Reserve’s latest policy meeting.
Looking ahead, the upcoming summer driving season is expected to drive higher crude oil demand. With non-OPEC+ production remaining flat in the first half of 2024 and potential wildfire-related disruptions in Canada, the market is increasingly dependent on OPEC+ to meet supply needs.
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