The pressure on the naira eased at the weekend after disclosure on sources of the expected $10 billion forex inflows announced by the Federal Government.
The expected dollar inflow has not only raised market confidence but pushed the naira to record significant gains across forex segments.
The naira closed the week at N1,145/$1 at the parallel market and N789.94/$ at the Investors and Exporters (I&E) window where over $400 million transactions were consummated on Friday.
Friday’s closure was an massive appreciation from N1,315/$1 it exchanged at the parallel market on Thursday.
Finance Minister and Co-ordinating Minister for the Economy, Wale Edun, had announced that Nigeria expects a $10 billion FX inflow in the next few weeks to ease liquidity in a foreign exchange market.
About $7 billion is being expected from Nigerian Liquefied Natural Gas (NLNG) dividend securitisation by a consortium of lenders led by Standard Chartered Bank this next week.
Another $3 billion is expected from the over two-month old emergency loan secured by Nigerian National Petroleum Company Limited (NNPCL) from the African Export-Import Bank (Afreximbank).
Both deals will bring the cumulative short-term forex inflows to the economy to $10 billion, which analysts said is enough liquidity to put the naira on sustainable path of recovery.
In emailed note to investors, Managing Director, Afrinvest Research, Biodun Keripe, linked the naira appreciation to clarity on the sources of the anticipated $10 billion inflows by the Federal Government .
the Afrinvest Weekly Market report released on Friday said: “Consequently, activity level in the Nigeria Autonomous Foreign Exchange Market (NAFEM) improved 3.3 per cent week-on-week to $440.4 million. Also, the naira strengthened 2.3 per cent week-on-week to N789.94/$1 at the NAFEM window. Similarly, in the the parallel market, naira appreciated 0.9 per cent week-on-week to N1,145/$1″ .
Continuing, the report said: “At the FMDQ Securities Exchange, Forex Contract Market, the total value of open contracts dipped 15.2 per cent, week-on-week to $4.2 billion. This came on the back of matured October 2023 instrument valued at $744.8 million. In the week ahead, we anticipate mild gains for the naira following expected dollar inflows”.
Speaking on the state of the forex market, President, Association of Bureaux De Change Operators of Nigeria (ABCON), Dr. Aminu Gwadabe, said naira’s ongoing rally is sustainable given the gradual return of confidence in the market.
According to him, the depreciation of the naira was not truly market-based, but artificial and will correct with improved liquidity.
Gwadabe described the efforts of the Federal Government toward ensuring the rebound of the naira as laudable.
“The depreciation of the naira is out of speculation, currency substitution and loss of confidence in the market. That confidence is gradually retuning and we expect to see further appreciation of the naira this week and beyond.
“The authorities ability to induce confidence in the market is commendable and should be sustained. It is also important to note that the Naira is just trying to discover its place as it is difficult to control price mechanisms by fiat in a competitive and liberalised market,” he said.
He said the naira rebound will be sustained in the market despite resistance by speculators who are already counting their losses,” he stated.