Naira gains as Nigeria’s FX reserves hit $34.7bn

Key Points

• Nigeria’s foreign exchange reserves reach new high of $34.7 billion
• Reserves gained $110 million in 24 hours and $316 million since July
• Reasons for growth: rising oil prices, diaspora remittances, CBN measures
• Fitch Ratings upgrades Nigeria’s economic outlook due to improved stability
• Naira appreciates against US dollar
• Increased reserves expected to attract foreign investors

 

Nigeria’s foreign exchange (FX) reserves have reached a new peak of $34.7 billion, after an impressive $110 million increase within a single day, according to the Central Bank of Nigeria (CBN).

This marks a cumulative rise of approximately $316 million since the beginning of July.

Factors Driving the Growth

Several factors contribute to this growth, including surging oil prices, enhanced diaspora remittances, and the CBN’s strategic efforts to stabilise the naira.

Analysts view the boost in foreign reserves as a positive sign for Nigeria’s economy, providing a buffer against external shocks and bolstering the country’s capacity to meet financial obligations.

Economic Outlook and Reforms

In a recent report, Fitch Ratings upgraded Nigeria’s economic outlook to positive, acknowledging significant reforms that have restored confidence, macroeconomic stability, and enhanced policy coherence and credibility.

CBN’s Strategic Measures

The CBN has implemented various measures to manage the FX market, such as introducing the Investors’ and Exporters’ window, attracting foreign investment, and bolstering reserves.

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These reforms have led to substantial inflows into the official FX market and a notable rise in foreign portfolio investment.

Naira Appreciates Against Dollar

The naira appreciated against the US dollar on Friday, July 5, 2024, trading at N1,509.67 per dollar, up from N1,520 the previous day. Data from the FMDQ Exchange shows that currency dealers quoted the naira at a high of N1,535 per dollar and a low of N1,450.

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Daily forex turnover at the Nigerian Autonomous Foreign Exchange Market (NAFEM) stood at $116.88 million on Friday.

Expert Commentary

Financial expert and journalist Ishaya Ibrahim commented on the rising FX reserves, emphasising its positive impact on investor confidence in Nigeria’s forex market.

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“Most investors consider a country’s reserve size before deciding to invest. Larger reserves attract more investors. However, the CBN and the Nigerian government must ensure the reserves are not rapidly depleted, as a robust reserve serves as a magnet for portfolio investors,” Legit quoted Ibrahim as saying.

Market Performance

The volume of dollars traded in the Nigerian Foreign Exchange Market (NAFEM) increased by 74 per cent year-on-year to $22.88 billion in the first half of 2024, up from $13.11 billion in the same period in 2023. An analysis of quarterly transactions from the FMDQ Exchange reveals that FX turnover was $12.64 billion in the first quarter of 2024, decreasing by 19 per cent to $10.24 billion in the second quarter.

A weekly analysis of June transactions in the official market shows that turnover was $1.05 billion in the first week, dropping by 21 per cent to $823.75 million in the second week.

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