The Nigerian naira regained substantial value against the major foreign currency on Tuesday at the organised market or official window, as US dollar demand outweighed available foreign currency supply.
The Nigerian Naira strengthened by 6.58% versus the US dollar in the Investors and Exporters FX window, ending at N742.93 per greenback, according to FMDQ Exchange spot FX data. The local currency passed the red line last weekend, trading above N803 amid the country’s US cash scarcity.
On Tuesday, the local currency decreased by 0.61% to N830 per greenback on the parallel market. Foreign currency merchants blame the prolonged fall to increased forex demand from Nigerian consumers seeking to avoid the bureaucracy of deposit money institutions.
Following the devaluation, currency rates have moved unfavorably before tensions begin to ease. Foreign portfolio investors are expected to inject hot money into the economy once the native currency is devalued in June 2023.
Analysts predict that Nigeria’s gross foreign reserves would fall below $34 billion before the end of the week, amid continuous criticism of the government for floating the naira.
Economists have mixed feelings about the direction of the Central Bank of Nigeria’s (CBN) foreign currency management amidst worsening price levels. Their claim against the apex bank is that devaluation of local currency only helps a productive economy.
A senior economic analyst asked: “What’s a country that depends on imports of goods and services doing with a large devaluation of the local currency while inflation is skyrocketing while salaries stagnate except steep perks for politicians?”
Oil market rallied Tuesday over a fiscal stimulus plan in China to drive economic growth. Brent crude rose 1.33% to $79.54 per barrel, while West Texas Instrument (WTI) crude gained 1.95% to $75.60 per barrel.
Oil futures were higher, supported by an improved demand outlook as indicated by a drop in the US crude output. Elsewhere, gold traded near $1,984 per ounce (+1.47%), boosted by lower US dollar and Treasury yields.
