Nigeria’s official foreign exchange (FX) market is experiencing significant volatility, with turnover dropping sharply by 75.98% to a three-week low of $92.68 million on Thursday, down from $385.91 million at the close of trading on Tuesday. This marked decline, the second in recent weeks, underscores ongoing challenges in the nation’s FX market.
On June 6, 2024, the value of the naira stood at N1,476.24/$1. By Friday, it was trading within a range of N1,400/$1 to N1,500/$1, reflecting the market’s sensitivity to supply and demand dynamics.
This downturn follows the African Export-Import Bank’s (Afrexim Bank) announcement on June 6 of the disbursement of $925 million, part of a $3.3 billion crude oil-backed loan agreement with the Nigerian National Petroleum Company Limited (NNPC) from the previous year. The latest disbursement brings the total paid to $3.175 billion. Afrexim Bank stated that the funds were raised from crude oil off-takers, including Oando Group and Sahara Energy.
FMDQ data from June 6 showed the naira at N1,476.24/$1, a 0.17% decrease from the previous N1,473.66/$1 on the NAFEX window. While this depreciation may seem minor, it highlights persistent pressures on the naira amid a fluctuating FX market. By Friday, the naira closed at N1,482.72/$1 in the official market, down from N1,500/$1 on Thursday, with intra-day lows of N1,400/$1, illustrating significant volatility.
Such fluctuations are common in an economy where external factors, policy announcements, and global market trends heavily influence currency stability. Experts attribute the naira’s susceptibility to shifts in global oil prices and local production issues due to Nigeria’s reliance on oil revenues.
Economic Implications
The volatility in Nigeria’s FX market has several implications for the broader economy. Import-dependent businesses face increased costs and pricing uncertainties, while the unstable currency environment may deter foreign direct investment, impacting economic growth.
Market Responses and Future Outlook
Financial analysts are closely monitoring the Central Bank of Nigeria’s (CBN) policy measures in response to current market conditions. The resumption of foreign exchange sales to Bureau De Change (BDC) operators at N1,301/$1 is one such effort to stabilize the naira.
As Nigeria navigates these turbulent times, there are calls for robust economic policies to enhance forex stability and mitigate adverse economic effects. The upcoming weeks will be crucial in determining whether the naira can stabilize or if further volatility lies ahead.
Tags: Nigeria, Forex, Naira, Market Volatility, Afrexim Bank, NNPC, Economic Policy
Photo source: Google
By: Montel Kamau
Serrari Financial Analyst
18th June, 2024
Article and News Disclaimer
The information provided on www.serrarigroup.com is for general informational purposes only. While we strive to keep the information up to date and accurate, we make no representations or warranties of any kind, express or implied, about the completeness, accuracy, reliability, suitability, or availability with respect to the website or the information, products, services, or related graphics contained on the website for any purpose. Any reliance you place on such information is therefore strictly at your own risk.
www.serrarigroup.com is not responsible for any errors or omissions, or for the results obtained from the use of this information. All information on the website is provided on an "as-is" basis, with no guarantee of completeness, accuracy, timeliness, or of the results obtained from the use of this information, and without warranty of any kind, express or implied, including but not limited to warranties of performance, merchantability, and fitness for a particular purpose.
In no event will www.serrarigroup.com be liable to you or anyone else for any decision made or action taken in reliance on the information provided on the website or for any consequential, special, or similar damages, even if advised of the possibility of such damages.
The articles, news, and information presented on www.serrarigroup.com reflect the opinions of the respective authors and contributors and do not necessarily represent the views of the website or its management. Any views or opinions expressed are solely those of the individual authors and do not represent the website's views or opinions as a whole.
The content on www.serrarigroup.com may include links to external websites, which are provided for convenience and informational purposes only. We have no control over the nature, content, and availability of those sites. The inclusion of any links does not necessarily imply a recommendation or endorsement of the views expressed within them.
Every effort is made to keep the website up and running smoothly. However, www.serrarigroup.com takes no responsibility for, and will not be liable for, the website being temporarily unavailable due to technical issues beyond our control.
Please note that laws, regulations, and information can change rapidly, and we advise you to conduct further research and seek professional advice when necessary.
By using www.serrarigroup.com, you agree to this disclaimer and its terms. If you do not agree with this disclaimer, please do not use the website.
www.serrarigroup.com, reserves the right to update, modify, or remove any part of this disclaimer without prior notice. It is your responsibility to review this disclaimer periodically for changes.
Serrari Group 2023
