Naira begins 2024 with 8.23% loss to dollar

The foreign exchange (FX) market on Tuesday conducted the first trading of the year, recording 8.23 percent loss in the value of the naira against the dollar at the official market.

This is despite the marginal accretion in foreign currency reserves seen to be driven by the $2.25 billion loan from Afreximbank.

After trading on Tuesday at the Nigeria Autonomous Foreign Exchange Market (NAFEM), naira weakened by N81.35/$ as the dollar was quoted at N988.46 compared to N907.11 quoted on Friday, the last trading day in 2023, data from the FMDQ indicated.

Naira, which opened strong at N951.61 per dollar, weakened to N1,130/$, the highest offer on the spot during the intraday trading, and N744.50/$ the lower offer by willing buyers and willing sellers.

The FX market recorded low dollar liquidity as the daily market turnover declined by 82.78 percent to $15.38 million on Tuesday, the first trading in 2024 from $89.30 million recorded on Friday, the last trading day of 2023.

In late December 2023, Nigeria received $2.25 billion of the long-awaited $3.3 billion foreign exchange support facility from Afreximbank, contributing to a marginal increase in external reserves.

Nigeria’s external reserves increased marginally by 0.06 percent in one day to $32.912 billion as of December 29, 2023 from $32.892 recorded on December 28, 2023, according to the data on the CBN website.

The economic headwinds and shocks of 2024 would not be as severe as what was experienced in 2023, Muda Yusuf, chief executive officer, Centre for the Promotion of Private Enterprise predicts.

According to him, efforts of the CBN in clearing the forex mature obligations, the removal of policy barriers to forex inflows, and the import substitution effects of domestic refining of petroleum products would have a considerable impact on the economic outlook for 2024.

“The efforts of the government to curb the menace of oil theft and boost crude oil output would positively impact on the outlook for foreign reserves and the stability of the exchange rate,” he said.

“We expect fuel subsidy and FX reforms to be completed in 2024, Standard Chartered Bank said in a note. It said while the Tinubu administration announced reforms just after the start of its new term, both measures stalled after running into operational difficulties; inadequate monetary tightening and a subsequent USD-NGN overshoot triggered a temporary pause in fuel price adjustments.

“The key test for 2024 will be whether these reforms can be revived, with a new cabinet and central bank leadership now in place. Despite a seemingly weak electoral mandate, the Tinubu administration has already proceeded with the more difficult elements of subsidy reform, long seen as the most contentious for Nigeria. We believe the authorities are committed to seeing FX and fuel liberalisation through to completion to drive macro stabilisation and higher investment,” the bank said.