The naira on Thursday closed flat across foreign exchange (FX) markets as dollar supply inched up, following improved liquidity from Afreximbank’s additional oil facilities.
Nigeria’s external reserves, which gives the Central Bank of Nigeria (CBN) the firepower to defend the has increased by 1.45 per cent in one month to $32.77 billion on June 4, 2024, compared to $32.30 billion on May 3, 2024, according to data from the CBN website.
The Federal Government has received an additional $925 million loan from the African Export-Import Bank (Afreximbank) to enhance the foreign exchange market and fulfil its dollar obligations.
Afreximbank announced the additional disbursement of $925 million under the syndicated $3.3 billion crude oil-backed prepayment facility, sponsored by the Nigerian National Petroleum Company Limited (NNPC). This facility aims to assist the Federal Government with its dollar obligations, stabilise the forex market via the Central Bank of Nigeria, and provide funding for NNPC, among other purposes.
Nigeria remains hopeful of getting more foreign exchange (FX) inflows into the country, after FX users consumed more dollars in three months through December 2023 compared to the preceding quarter, according to the latest Quarterly Statistical Bulletin from the CBN.
The inflows are likely going to come from NNPC-related flows, World Bank budget financing and potential Eurobond issuance.
“For investors – and Nigeria’s ability to attract further FX-stabilising inflows into local currency markets, this matters a great deal”, said, Razia Khan, managing director, Chief Economist, Africa and Middle East Global Research, Standard Chartered Bank.
The naira has remained weak against the US currency at the official and unofficial FX markets despite the various policy measures introduced by the CBN to boost the dollar supply and stabilise the local currency.
After trading on Thursday, the naira gained 0.48 per cent as the dollar was quoted at the rate of N1,481.49, which was stronger than N1,488.60 quoted on Wednesday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to data obtained from the FMDQ Securities Exchange Limited.
The dollar supplied by the willing sellers and willing buyers, including commercial banks increased marginally by 3.83 per cent to $213.31 million on Thursday from $205.43 million recorded on Wednesday.
According to the FX market summary released by the FMDQ, the intraday high, the highest bid rate on the spot trading, closed at N1,505 per dollar on Thursday, stronger than the N1,520 closed on Wednesday.
The intraday low depreciated to N1,401/$ on Thursday as against N1,363.85 quoted on Wednesday at the NAFEM.
The local currency also traded flat at N1,495 against the dollar on the parallel market, popularly called the black market.
This represents a flat rate of 0.33 per cent compared to N1,490 exchanged on Wednesday according to data collated from online trading platforms and some street traders.
The dollar was sold for N1,475 on Broad Street in Lagos, where numerous traders gathered around several banks to buy the currency.
The naira on Wednesday depreciated for the second trading day in the month despite an increase in the foreign currency reserves by 1.45 per cent in one month.
Benedict Oramah, president and Chairman of the board of directors of Afreximbank, said, “The milestone achieved thus far on this facility demonstrates the bank’s capabilities as a crucial development partner for Africa. It reaffirms our commitment to assisting our member states in their efforts to achieve economic growth and stability. This funding will greatly support the attainment of Nigeria’s short and long-term economic development priorities.”
The recent disbursement under Project Gazelle Funding Limited increases the total funded facility size to $3.175 billion. The arrangement, coordinated by Afreximbank, raised $925 million from a consortium of crude oil off-taker lenders, including the Oando Group and Sahara Energy Resource Limited.
Afreximbank served multiple roles in this transaction, acting as the Mandated Lead Arranger, Technical and Modelling Bank, Bookrunner, Facility Agent, Offshore Account Bank, Intercreditor Agent, and Collateral Agent. The bank stated that this support is intended to bolster Nigeria’s macroeconomic stability and long-term growth while promoting industrialisation and trade development.
The latest disbursement followed the success of the initial tranche of the $3.3 billion facility, which secured $2.25 million in December 2023. The $925 million added brings the total disbursed amount to $3.175 billion.
The directors expressed approval for the elimination of distortions in the foreign exchange market and urged Nigerian authorities to further enhance its operation.
The Washington D.C.-based Fund reported that gross international reserves fell in 2023 due to ongoing capital outflow pressures. The naira experienced a significant depreciation following the consolidation of the official foreign exchange windows in June 2023. “After the monetary policy was tightened in February and March 2024 and FX interventions resumed, the naira has begun to stabilise,” stated the IMF directors in their concluded Article IV consultation with Nigeria.
