The Nigerian naira has experienced a boost as the Federal Government unveils the sources of an anticipated $10 billion forex inflow, alleviating pressure on the national currency. This development has not only increased market confidence but also led to significant gains in the forex segments.
At the close of the week, the naira was valued at N1,145/$1 at the parallel market and N789.94/$1 at the Investors and Exporters (I&E) window. In the I&E window, over $400 million in transactions were carried out on Friday. This marks a substantial improvement from the N1,315/$1 exchange rate observed in the parallel market just a day earlier.
Finance Minister and Coordinating Minister for the Economy, Mr. Wale Edun, disclosed that Nigeria is expecting a $10 billion FX inflow in the coming weeks to enhance liquidity in the foreign exchange market. Approximately $7 billion is anticipated from the Nigerian Liquefied Natural Gas (NLNG) dividend securitization, led by a consortium of lenders led by Standard Chartered Bank, which is scheduled for the following week. An additional $3 billion is expected from an emergency loan secured by the Nigerian National Petroleum Company Limited (NNPCL) from the African Export-Import Bank (Afreximbank).
These two deals are set to bring short-term forex inflows to a cumulative total of $10 billion, a considerable amount that experts believe will provide the necessary liquidity to put the naira on a sustainable path to recovery.
Managing Director of Afrinvest Research, Biodun Keripe, in a note to investors, attributed the naira’s appreciation to the clarity regarding the sources of the expected $10 billion inflows from the Federal Government.
The Afrinvest Weekly Market report, released on Friday, also stated: “Consequently, activity in the Nigeria Autonomous Foreign Exchange Market (NAFEM) improved by 3.3 percent week-on-week to $440.4 million. Additionally, the naira strengthened by 2.3 percent week-on-week to N789.94/$1 at the NAFEM window. Similarly, in the parallel market, the naira appreciated by 0.9 percent week-on-week to N1,145/$1.”
President of the Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, expressed optimism about the sustainability of the naira’s recent rally. He attributed the depreciation of the naira to speculation, currency substitution, and loss of confidence in the market, which is gradually returning as efforts are made to enhance liquidity.
Gwadabe commended the Federal Government’s endeavors to revive the naira and expressed his belief that the currency’s appreciation would continue. He also noted that it’s challenging to control price mechanisms through fiat in a competitive and liberalized market, but the naira’s rebound is expected to persist, despite resistance from speculators who are facing losses.
This development brings hope for the naira, which has faced recent volatility, and indicates a positive trend in Nigeria’s foreign exchange market.