The Nigerian naira experienced slight appreciation against major currencies in November, both in the official and parallel markets. Data from FMDQ and Bureau de Change (BDC) operators highlight these shifts.
Official Market Performance
In the official market, the naira appreciated against the dollar by 0.17%, moving from an opening rate of ₦1,675.49/$1 on November 1 to ₦1,672.69/$1 at the end of the month.
- The weakest official rate for the month was ₦1,690.37/$1 on November 18, while its strongest performance was recorded at ₦1,644.86/$1 on November 28.
Parallel Market Performance
The parallel market showed a 0.40% appreciation of the naira, starting the month at ₦1,750/$1 and closing at ₦1,743/$1 by November 30.
- The naira reached its highest value in the parallel market at ₦1,725/$1 on November 12 and its lowest at ₦1,755/$1 on November 22 and 26.
- Gains extended to other currencies, with the naira strengthening by 1.76% against the pound to close at ₦2,230/£1 and by 1.88% against the euro, ending at ₦1,830/€1.
Market Trends
November saw a mix of depreciation and recovery trends for the naira:
- The currency depreciated during the first half of the month in the official market but rebounded in the last week.
- In contrast, the parallel market recorded gains in the first two weeks, followed by some depreciation towards the end.
- Trading volumes peaked at $1,403.76 million on November 8, compared to $244.96 million on November 7.
Key Influencing Factors
Several factors impacted the naira’s performance:
- Import Duty Waivers: The government’s exemption of import duties and VAT on select food items (July 31 to December 31, 2024) increased importation, heightening dollar demand.
- Crude Oil Prices: With crude oil averaging $78.62 per barrel in November, weak global demand—especially from China—limited Nigeria’s revenue.
- CBN Interventions: The Central Bank of Nigeria sold $20,000 to eligible BDC operators at ₦1,580/$1 in September, helping to ease currency pressures.
- Refined Fuel Policy: Allowing local marketers to source refined fuel from the Dangote Refinery may reduce import dependency and ease forex demand.
- Foreign Reserves: Nigeria’s reserves grew by 1.10%, rising from $39.78 billion to $40.22 billion, bolstering the CBN’s intervention capacity.
Outlook for the Naira
Looking ahead, the naira’s trajectory will depend on various factors:
- Oil Revenue and Inflation: With oil prices under $80 per barrel, revenue pressures persist, exacerbating inflation and currency challenges.
- Forex Demand: The holiday season is likely to drive increased imports, putting additional pressure on the naira.
- Structural Reforms: Long-term stability hinges on broad economic reforms and global market conditions.
Projection:
The naira may face further pressure, with official rates ranging between ₦1,700/$1 and ₦1,750/$1. In the parallel market, rates could reach as high as ₦1,800/$1. Structural adjustments remain critical for lasting improvements.
This research was carried out by Factwrita.com editor, Jubril Lawal.
