The naira strengthened further as forex market liquidity outpaced US dollar demand recorded by qualifying FX customers in Nigeria’s autonomous foreign exchange market. A similar minor positive trend was observed in the informal currency market, as the Central Bank of Nigeria rose to the occasion to reverse the negative pattern shown over the previous three weeks.
May 2024 has not been a good month for the naira in the currency markets, following the consistent advance registered the previous month. According to a Bizwatch Nigeria report, the central bank sold foreign exchange to local banks last week in a new effort to strengthen the naira, which has fallen 43% in 31 days.
Currency dealers anticipate that subsidized US dollar sales to Bureaux de Change operators (BDCs) will mitigate the negative impact of US dollar demand pressures on the naira. According to statistics from the FMDQ Securities Exchange, the naira strengthened versus the US dollar, rising 0.23% to settle at N1,465.68 per US dollar in the official market.
Also, the exchange rate appreciated by 0.48% in the parallel market, closing at an average of N1466 per greenback.
Nigeria’s gross external reserves climbed to $32.663 billion over sustained FX inflows from remittance, ahead of more than $2 billion in inflows from an external lender in June. The nation’s foreign reserves started receiving inflows after it hit a low of $32.106 billion around April 19. 2024.
Brent crude traded slightly above $83 per barrel amidst uncertainties in the global commodity market. The West Texas Intermediate (WTI) crude futures fell below $79 per barrel on Tuesday after a 0.4% loss the previous day. The slide was due to concerns over continued high interest rates by the US Federal Reserve, which has led to a pessimistic outlook on global growth and energy demand.
At the Monetary policy committee meeting, members highlighted the naira’s volatility, attributing it to seasonal demand, a characteristic of a market-driven FX market. Furthermore, the Committee noted the marginal increase in FX reserves while urging the CBN to sustain its focus on increasing its FX reserves.
The Committee praised the recent decision by the CBN to grant licenses to fourteen International Money Transfer Operators (IMTOs), anticipating that this move would enhance competition within the sector and facilitate remittances through official channels.
