Naira, Foreign Reserves Tumble on Higher Demand for FX

The Nigerian Naira and the nation’s gross foreign reserves nosedived amidst uncertainties in the economy while citizens battled an unending scarcity of the local currency for their daily spending.

At the Investors’ and exporters’ foreign exchange window on Friday, the naira lost against the United States dollar to N461.50 at the Investors’ and Exporters’ window.

Backpedalling from previous gaining streaks, the exchange rate represents a 0.11 per cent decline in purchasing value of the local currency, compared to the N461 for which it exchanged to the dollar on Thursday.

The open indicative rate closed at N461.50 to the dollar on Friday, according to FX market data. An exchange rate of N462.44 to the US dollar was the highest rate recorded within the day’s trading before it settled at N461.50.

The Naira sold for as low as N446 to the dollar within the day’s trading. A total of US$ 82.56 million was traded at the official Investors’ and Exporters’ window.

According to data from the Central Bank of Nigeria (CBN) website, Africa’s largest economy’s gross foreign reserves declined for the eighth consecutive week.

The decline was driven by the apex bank market intervention following the apex bank FX auction conducted in the week. Trailing the pre-pandemic level, the CBN maintains weekly FX auctions to strengthen the naira position in the market.

In the week, external reserves declined by USD197.84 million to USD36.41 billion as inflows from oil remains under pressure. Also, there is a sustained decline in FX inflows into Nigeria amidst unpriced risk.

CBN FX backlog is building, according to analysts. The World Bank and the International Monetary Fund, have also asked the CBN to adopt a market-clearing rate to attract foreign inflows into the economy. Naira, Foreign Reserves Tumble on Higher Demand for FX.