JUST IN: Naira appreciates as Nigeria’s foreign reserves increase to $34.66 bn

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The naira has shown signs of recovery from recent losses as foreign exchange liquidity pressures eased over the weekend, pushing the exchange rate below N1520 in the official market amidst a worsening forex crisis in Nigeria.

This is as Nigeria’s foreign exchange reserves also saw an uptick, reaching a 13-month high with an increase of $465.21 million to $34.66 billion. This boost provided some relief to the foreign exchange market, reducing speculative activities and bolstering the naira against the US dollar across different market segments.

According to the FMDQ forex spot rate, the naira closed at N1,509.67 per US dollar, marking a 0.70% appreciation from the previous close. In the parallel market, the naira strengthened by 0.43%, closing the day at an average of N1,523 per dollar.

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Different degrees in exchange rate movements however widened the forex gap to N14 on each US dollar. Exchange rates gap between official and parallel markets had reduced to N2.

Market forces analysts said activities in the forex market this week still reflect that forex liquidity remains frail, given weak inflows from the CBN – despite the recent accretion to forex reserves.

According to data from the central bank, Nigeria’s foreign exchange reserves rose to a 13-month high as the gross reserves level increased by $465.21 million to $34.66 billion.

When the CBN announced the FX unification policy, Nigeria’s external reserves were at $34.66 billion. However, from July to December 2023, the reserves fluctuated within the $33 billion range.

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The external reserve hit $34.66 billion as of July 4, 2024 the highest in over a year.

This is only second to the $34.69 billion achieved on the 13th of June 2023, just before the exchange rate was unified by the government.

Nigeria has been experiencing a surge in exchange rate in the last few weeks ending the month of June above $34 billion for the first time since April. The reserves have continued to swell in July hitting multiple highs that have now culminated in the highest reserve in the last one year.

he central bank Governor had to address the issue of the decline at the last IMF Spring meeting, where he said that the decreasing reserves were primarily due to debt repayments and other standard financial obligations, rather than efforts to defend the naira.

However, since then, a gradual and consistent upward trajectory has been observed, coinciding with a period of exchange rate stability with the reserves eventually culminating into the $34.66 billion recorded on July 4, 2024.

In the past one month, the reserves have surged by 6% from $32.78 billion recorded on the same day of the previous month.

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Recall that as global forex reserves reached $12.3 trillion at the end of 2023, Nigeria’s forex reserves declined to $32.3 billion, representing just 0.26% of global reserves, down from 0.36% in 2022, mainly due to decreased forex inflows and increased outflows.

The recent rise in FX reserves since May comes after three months of noticeable fluctuations when it plunged to a low of $32.11 billion on April 19, 2024.

This earlier dip may be attributed to increased import demands, payment obligations, or reduced foreign inflows during that period.

The latest data from the National Bureau of Statistics also reveal Nigeria received a total capital importation of $3.9 billion in the first quarter of the year.

Most of the inflows were directed towards government debt securities such as treasury bills, OMO bills and bonds.

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