The Rise of Naira Bulls: Following erroneous demand for foreign currency that exacerbated exchange rates early in the year, an increasing number of investment organizations have shifted their stance to positively for Nigeria’s naira.
In their respective forecasts, Goldman Sachs, Renaissance Capital, and Financial Derivative Company (FDC) all predicted that the local currency would recover losses incurred following the official devaluation. According to figures from FMDQ, the turnover of the Nigerian autonomous foreign exchange market climbed by +14.4%, or US$272.4 million, to close at USD 2.2 trillion on Thursday.
Of the USD869.1 million that was input into the NAFEM window at this time, the CBN contributed 17.1%, foreign portfolio investors provided 36%, non-bank corporates contributed 25.7%, exporters contributed 17.6%, and others contributed 3.6%.
The naira came under pressure in the first quarter of the year due to the scarcity of foreign currency inflows in the official market. At the same time, there was rising demand for the US dollar in the parallel market for invisible demand.
In the first quarter of 2024, the worst-ever depreciation of exchange rates occurred in both markets, which trickled down to consumer prices and increased inflation to 31.70% in February. This was supported by massive speculative activities in the forex markets. The determination of the authorities to curb speculative activities in the foreign exchange market has contributed to a rise in confidence.
FX inflows into the market have improved following multiple directives introduced by the central bank, including asking banks to reduce their net open positions. Additionally, a cap on the amount that foreign oil companies can repatriate at a time was imposed by the Central Bank of Nigeria (CBN).
In the foreign exchange market, the Naira strengthened by 0.62%, closing at ₦1,255.07 per US dollar in the official market. Also, the Naira closed at ₦1,235 to the US dollar in the parallel market following subsidised FX sales to Bureau de Change operators.
In the global commodity market, oil prices took a negative turn, as Brent crude decreased by 0.35% to $89.24 per barrel, and WTI crude dropped by 0.42% to close at $85.23 per barrel.
