The Nigerian naira strengthened in the official currency market as foreign reserves surged close to $40 billion, buoyed by sustained foreign exchange (FX) inflows. Reforms to boost investor confidence, alongside relatively high yields in Nigeria’s debt market, have spurred foreign currency inflows into the country.
According to data from the FMDQ platform, the naira appreciated by 0.33%, closing at ₦1,671.32 per US dollar in the official market on Tuesday. This positive movement was partly driven by reduced demand for the US dollar in the official market, as participants anticipate the Central Bank of Nigeria’s (CBN) weekly FX auction.
Although the official exchange rate remains relatively low, volatility in the FX market has brought rates closer to those in the parallel market, narrowing the gap. In the parallel market, the naira strengthened to ₦1,710 per US dollar, gaining ₦15 in one day as reduced household spending led to a cutback in imports.
Currently, the exchange rate gap stands at ₦39, a significant reduction from the levels seen in October 2024. Data from the CBN indicates that foreign reserves rose to $39.956 billion, bolstered by steady FX inflows from various sources amid global commodity market uncertainties.
Reports from FMDQ revealed that inflows into the Nigerian Autonomous Foreign Exchange Market (NAFEM) hit a five-month high in October, increasing by 40.2% to $3.04 billion from $2.17 billion in September.
Analysts attribute this growth primarily to a significant rise in foreign inflows, which accounted for 44.6% of total inflows, while contributions from local sources declined for the second month in a row, representing 55.4% of inflows. Meanwhile, oil prices remained steady, with Brent crude reaching $76.08 per barrel and WTI at $72.55, following a recent OPEC+ decision to delay a planned production increase in December.
Additionally, gold prices have climbed as investors brace for potential political uncertainty. With a close race predicted between Donald Trump and Kamala Harris in upcoming elections, gold is currently valued at $2,750.50 per ounce.
