The Nigerian Naira has seen a positive turn, appreciating to N1,506 per dollar at the official window. This appreciation comes as the nation’s foreign reserves reached a significant milestone of $41.500 billion, indicating improved liquidity in the foreign exchange market.
According to the Central Bank of Nigeria (CBN), the official spot rate settled at N1,506.84 per dollar on Monday. This marks an appreciation from N1,514.87 recorded last week and is attributed to a lack of significant demand pressure for foreign exchange. Analysts anticipate the Naira will remain relatively strong, supported by broader pressures on the US dollar index in the global market. In the parallel market, the exchange rate held steady at N1,540 per dollar.
Foreign Exchange Inflows
Last week, total foreign exchange inflows amounted to $567.2 million, a decrease from the previous week’s $706.7 million. Foreign Portfolio Investments (FPIs) were the primary contributors, accounting for 32.5% of the total inflows with $184.1 million. The CBN also played a crucial role, intervening in the market with $173.1 million, which represented 30.5% of the inflows.
The increase in gross external reserves to $41.499 billion is a direct result of these sustained inflows from various foreign sources, including hydrocarbon revenue. This growth has occurred despite recent fluctuations in the global commodity market.
Crude Oil Market Volatility
The Brent crude oil price experienced a decline last week, closing down 3.85% at $65.5 per barrel. The year-to-date decline now stands at 12.25%. While oil prices had initially gained strength due to supply concerns and strong Asian demand, the rally was short-lived. A softer US jobs report raised fears of a potential economic slowdown, which could dampen oil demand.
This was further compounded by an unexpected increase in US crude inventories, signaling weaker near-term consumption. Analysts predict continued volatility in crude prices, with the market’s direction dependent on the balance between demand signals and supply decisions from producers like OPEC+.
Looking ahead, the CBN is set to open a subscription for Treasury Bills worth N480 billion, which may further impact the currency market.
