CBN says rise in crude oil exports will strengthen the naira

The Central Bank of Nigeria (CBN) has said an improvement in domestic production of crude oil and its exports will raise the value of the naira.

The CBN disclosed this in its latest report entitled “Macroeconomic Outlook: Price Discovery for Economic Stabilisation.”

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“The expected rise in crude oil export receipts would provide further impetus to the market, moderate depreciation pressures and strengthen the naira,” the Abuja-based bank said in its debut outlook.

Nigeria’s apex bank also said improved investor confidence and higher remittances as a result of the reforms in the foreign exchange market, are expected to help stabilise the exchange rate.

It noted that the outlook for the Nigerian economy indicates broad resilience, with continued growth, expected moderation of inflation, and greater exchange rate stability.

“The outlook is shaped by continued improvements in the domestic production and refining capacity of crude oil, as well as the expected rise in crude oil prices that could prop up growth to 3.38 per cent in 2024 from 2.74 percent in 2023,” the CBN said.

Even as Nigeria has consistently fallen short of the Organisation of Petroleum Exporting Countries (OPEC) production quota of 1.5 million barrels per day and its budget target of 1.78 million barrels per day with average daily crude oil production at 1.276 million barrels per day (bpd) in June.

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The central bank has continued to dish out different reforms which is expected to entrench efficiency and transparency in the foreign exchange market.

These policies have narrowed the gap between the Bureaux de Change (BDC) and the Nigerian Autonomous Foreign Exchange Market (NAFEM) rates, and stabilised the exchange rate.

“Interventions by CBN may cause the Naira to stabilise in the long-term. However, these interventions may become subdued in the absence of improved capital flows and export proceeds to the foreign reserves”, PwC, a professional advisory firm said in its Nigeria’s economic outlook for June.

Last week, the CBN said it intervened in the foreign exchange market by selling the sum of $122.67 million to 46 authorised dealers in its determination to promote stability and reduce market volatility in the market.

But this is yet to strengthen the naira as the local currency exchanges for N1,5581.65 per one US dollar at the official market on Thursday while it’s edging towards N1,650 at the parallel market.

However, the apex bank said it would “sustain the willing-buyer and willing-seller market-based approach, among other policy measures, to ensure price discovery, transparency, efficiency and stability in the foreign exchange market” in the short-term.