The Nigerian Naira experienced a significant boost over the weekend following the disclosure of the sources of an expected $10 billion forex inflow announced by the Federal Government. The anticipation of substantial dollar inflow not only bolstered market confidence but also propelled the Naira to remarkable gains across various forex segments.
At the close of the week, the Naira stood at N1,145/$1 in the parallel market and N789.94/$1 at the Investors and Exporters (I&E) window. Notably, more than $400 million in transactions were concluded on Friday alone. This represented a remarkable appreciation from the previous rate of N1,315/$1 in the parallel market just the day before.
Finance Minister and Coordinating Minister for the Economy, Mr. Wale Edun, had announced the expectation of a $10 billion FX inflow in the coming weeks, aimed at alleviating liquidity issues in the foreign exchange market. Approximately $7 billion of this is anticipated from Nigerian Liquefied Natural Gas (NLNG) dividend securitization by a consortium of lenders led by Standard Chartered Bank in the upcoming week. An additional $3 billion is expected from the emergency loan secured by the Nigerian National Petroleum Company Limited (NNPCL) from the African Export-Import Bank (Afreximbank).
The cumulative impact of these deals is expected to inject enough liquidity into the economy, $10 billion in total, to put the Naira on a sustainable path to recovery, according to analysts.
Biodun Keripe, Managing Director of Afrinvest Research, connected the Naira’s appreciation to the clarity regarding the sources of the expected $10 billion inflows by the Federal Government. The recent report from Afrinvest’s Weekly Market noted the improvement in activity levels in the Nigeria Autonomous Foreign Exchange Market (NAFEM), a strengthening Naira at NAFEM, and a similar strengthening in the parallel market. These developments hint at further gains for the Naira in the week ahead.
President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, expressed confidence in the Naira’s ongoing rally, stating that it is sustainable, given the gradual return of confidence in the market. He emphasized that the Naira’s depreciation was primarily a result of speculation, currency substitution, and a loss of market confidence. As confidence gradually returns, the Naira is expected to continue appreciating.
Gwadabe commended the Federal Government’s efforts to boost confidence and sustain the Naira’s rebound. He believes the Naira’s resurgence will persist despite resistance from speculators who are now facing losses in the market.
