Charles Daisi
Thursday saw the naira maintaining stability across foreign exchange markets as dollar supply experienced a slight uptick, buoyed by enhanced liquidity from Afreximbank’s additional oil facilities.
Nigeria’s external reserves, crucial for the Central Bank of Nigeria’s ability to safeguard the currency, grew by 1.45% within a month, reaching $32.77 billion by June 4, 2024, up from $32.30 billion on May 3, 2024, as per CBN data.
The Federal Government secured an extra $925 million loan from Afreximbank to bolster the forex market and meet dollar obligations.
Afreximbank disbursed this sum under the syndicated $3.3 billion crude oil-backed prepayment facility, facilitated by the Nigerian National Petroleum Company Limited (NNPC). This move aims to ease dollar pressures, stabilize the forex market via CBN interventions, and provide funding for NNPC.
Nigeria anticipates further forex inflows, particularly from NNPC-related transactions, World Bank budgetary support, and potential Eurobond issuance.
Razia Khan, Managing Director and Chief Economist for Africa and the Middle East at Standard Chartered Bank, stressed the significance of these inflows for investors and Nigeria’s currency stability.
Despite CBN’s efforts to boost dollar supply and stabilize the naira, the currency remains weak against the US dollar across official and unofficial markets.
Following Thursday’s trading, the naira appreciated by 0.48%, with the dollar quoted at N1,481.49 compared to N1,488.60 on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
Dollar supply, including from commercial banks, increased marginally to $213.31 million on Thursday from $205.43 million on Wednesday.
The FMDQ’s FX market summary indicated a stronger intraday high of N1,505 per dollar on Thursday, contrasting with N1,520 on Wednesday, while the intraday low depreciated to N1,401/$ on Thursday from N1,363.85 on Wednesday.
On the parallel market, the naira traded flat at N1,495 against the dollar, reflecting a 0.33% stability compared to N1,490 on Wednesday.
Despite the increase in foreign reserves, the naira depreciated for the second consecutive trading day in June.
Benedict Oramah, President and Chairman of Afreximbank’s board of directors, highlighted the bank’s commitment to Africa’s economic growth, stating that the additional funding will support Nigeria’s economic priorities.
This recent disbursement under Project Gazelle Funding Limited brings the total funded facility size to $3.175 billion. Afreximbank coordinated this arrangement, securing $925 million from a consortium of crude oil off-taker lenders.
The IMF, in its Article IV consultation with Nigeria, noted that after monetary policy tightening and FX interventions, the naira has shown signs of stabilization following significant depreciation in 2023.
