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Naira makes its first gain against the USD in 2024, thanks to Afreximbank’s Injection.
Naira makes its first gain against the USD in 2024, thanks to Afreximbank’s Injection.
The Nigerian Naira experienced a significant gain against the dollar on Thursday, January 4, 2024, marking its first positive movement in the new year. According to the Nigeria Autonomous Foreign Exchange Market (NAFEM), the currency increased by 13.51%, closing at N895.23 to the dollar in the official market.
This notable surge was largely anticipated, following a $2.25 billion injection from the African Export-Import Bank (Afreximbank). The injection was specifically designed to address the acute liquidity shortage in the foreign exchange (FX) market, a challenge that has persisted since the unification of the FX market by the Central Bank of Nigeria (CBN) on June 14, 2023.
The impact of this injection was evident as the Naira made substantial gains, reflecting an increase of 13.51% compared to the previous day’s close at N1035.12. The intraday high and low were recorded at N1268/$1 and N701/$1, respectively, showcasing a significant spread of N567/$1. Additionally, the forex turnover at the close of trading amounted to $68.49 million, representing a 20.06% decrease compared to the previous day.
While the official market experienced this positive shift, the parallel forex market witnessed a marginal decline, with the exchange rate quoted at N1230/$1, indicating a 0.81% decrease from the previous day’s close. Peer-to-peer traders quoted around N1240.26/$1, further emphasizing the nuanced dynamics of the forex market.
The injection from Afreximbank, a pivotal agreement signed on December 29, 2023, has been instrumental in addressing Nigeria’s FX liquidity challenges. This strategic financial arrangement, valued at US$3.3 billion, involves multiple stakeholders, including Afrexim Bank, United Bank for Africa (UBA), NNPC Limited, Guvnor, and Sahara Energy, among others. UBA, in its role as the Onshore Depository Bank, has been integral to the successful execution of this arrangement.
The release of the first tranche, amounting to US$2.25 billion, is a significant step towards alleviating Nigeria’s FX supply challenges. This sum, deposited into a designated account at the Central Bank, is expected to ease forex liquidity pressures, thereby fostering greater stability within the FX market.
The involvement of NNPC and major oil trading firms, such as Sahara Energy, Vitol, Oando, and Gunvor, as sub-lenders further underscores the collaborative effort to bolster Nigeria’s FX market. Notably, UBA, Sahara Energy, Vitol, Oando, and Gunvor collectively contributed $100 million to the facility, emphasizing their commitment to supporting Nigeria’s economic stability.
Finally, the Naira’s remarkable gain against the dollar, propelled by Afreximbank’s injection and the collaborative efforts of key stakeholders, indicates a positive trajectory for Nigeria’s FX market in 2024. This development not only reflects a strengthening of the Naira but also underscores the potential for sustained stability and growth within the country’s economic landscape.
