On Tuesday, the Nigerian local currency recovered somewhat against the dominant US dollar in the foreign exchange (FX) market, closing at N1,594, according to statistics from the FMDQ website.
The naira declined by 0.31% in the parallel market, closing at₦1,610 per US dollar due to rising demand for invisible FX transfers. In its mid-year economic analysis, Coronation Research found that US dollar inflows into the autonomous FX market increased by 94.44% between the first half of 2023 and the same time in 2024.
The apex bank contribution was less than 9%, while non-bank corporate entities provided the largest contribution to the supply side, followed by foreign portfolio investors and exporters.
The exchange rate outlook remains dicey, with some analysts hoping to see the local currency strengthen with FX inflows and a sizeable net balance in external reserves.
Nigeria’s economic landscape reflects both challenges and opportunities. The nation’s gross domestic product grew by 3.19% in the second quarter of the year despite structural issues like inflationary pressures, currency depreciation, and low agricultural productivity.
However, the oil sector’s recovery, driven by reforms, offers optimism, Coronation Research said in its mid-year economic report recently published.
The firm said the exchange rate could stabilize within the N1,350–1,600 range, contingent on increased FX inflows from foreign portfolio investors and the expected US$2.3 billion World Bank loan.
The firm said the substantial public debt burden, now at N121.6 trillion, underscores the urgency of fiscal consolidation and strategic debt management to mitigate further currency and inflationary pressures.
“The evolving macroeconomic environment presents both risks and opportunities. The persistent inflationary pressures and exchange rate volatility are likely to exert upward pressure on interest rates, affecting borrowing costs and potentially slowing down credit growthh,” Coronation Research said in its report.
“The FX rate is expected to range between N1,450 and N1,600 per USD at both the official window and the parallel market over the three months.
“We see Naira stability in the near term partly due to CBN’s resumption of the retail Dutch auction system to mitigate FX demand pressure, increased FX injections from FPIs, and improved oil production,” the report said.
According to a Coronation Research analysis, the Nigerian independent foreign exchange market had an influx of USD 14.65 billion in the first half of 2024, up from USD 7.38 billion in the same period in 2023.
The breakdown revealed that the CBN accounted for 8.7% of the total, FPIs for 29.7%, non-bank corporates for 31.7%, exporters for 23.4%, and others for 6.5% of the inflows.
Crude oil prices dipped today, following a previous session increase caused by OPEC member Libya’s decision to suspend production and exports. Brent prices decreased 1.39% to $80.30, and WTI prices sank 1.58% to $76.18. The gold price likewise fell by 0.07% to $2,553.40 an ounce.
