Due to a persistent foreign exchange liquidity problem that hasn’t abated, the value of the naira, the indigenous currency of Nigeria, fell versus the US dollar on Thursday in the official window. According to data from the FMDQ platform, which quotes daily spot rates, the naira lost 0.16% of its value relative to the US dollar and ended the day at ₦1,485.36.
The outlook for the local currency is still positive despite the persistently unfavorable pricing, according to economists, who pointed out that the naira will gain from foreign exchange inflows due to the World Bank loan. According to data retrieved from the Central Bank of Nigeria (CBN), Nigeria’s external reserves have seen an increase in US dollar inflows.
Gross external reserves climbed to $35.578 billion, after successive foreign currency inflows from various sources, which some analysts suggest relate to NNPCL revenue collections by the apex bank.
In the global commodity market, Brent crude futures increased by 0.54% to $85.79 a barrel, while U.S. West Texas Intermediate crude futures advanced by 0.70% to $81.28 a barrel. Nigeria lost huge revenue due to under production of crude oil which accounts for about 90% of the nation’s foreign currency receipt.
Crude output slipped to 1.25 million barrels per day in the recent past months, according to monthly oil report by the Organisation of Petroleum Exporting Countries. To combat FX scarcity challenge, the authority had announced plan to issue US dollar denominated domestic bonds in June, 2024.
The timing, and plan still remain scanty. Latest World Bank loan could stop US dollar domestic bond issuance plan, according to LSintelligence Associates.
At the parallel market, the Naira closed at N1,470 per US dollar due to sizeable demand for foreign currency for invisible transactions. “We remain bullish on Naira over the short term”, Vetiva Capital Management Limited said in a macro update following the World Bank $2.25 billion loan approval.
Analysts said this combined $2.25 billion package provides immediate financial and technical support to Nigeria’s urgent efforts to stabilize the economy and scale up support to the poor and most economically at risk.
“We expect this package, alongside an earlier $900 million receipt from the Africa Export-Import Bank, to bolster the external reserve stock and stem the slide in the naira. We remain bullish on the naira over the short term because of this multilateral support,” the firm said.
