Nigeria’s foreign exchange reserves continued its upward trajectory last week, marking an increase of USD 49.07 million week-on-week to reach USD 33.09 billion as of January 11, 2024. However, amidst this positive reserve trend, the naira experienced a 2.4% depreciation against the US dollar, closing at NGN 890.54/USD in the Nigerian Autonomous Foreign Exchange Market (NAFEM).
Total turnover in the NAFEM surged by 29.4% week-to-date to USD 457.45 million, with trades executed within the NGN 475.00 to NGN 1,289.00/USD range. In the Forwards market, naira rates depreciated across various contract periods: 1-month (-7.8% to NGN 983.89/USD), 3-month (-7.5% to NGN 1,005.14/USD), 6-month (-7.2% to NGN 1,039.12/USD), and 1-year (-6.8% to NGN 1,114.08/USD).
Analysts anticipate that FX liquidity conditions will remain tight in the near term, pending the receipt of expected FX inflows. This expectation suggests a persistent pressure on the local currency as foreign investors closely monitor developments in the FX space, particularly in light of expected FX inflows guided by authorities, recent actions by the Central Bank of Nigeria (CBN) in clearing its FX backlogs, and the firm direction of short-term interest rates.
