Despite significant improvements in Nigeria’s foreign exchange market fundamentals, the naira continues to struggle, trading at N1,600/$ in the black market as of Wednesday morning. This trend persists even as the U.S. dollar index hovers near a seven-month low.
Naira short sellers remain undeterred, even in the face of the Federal Government’s recent issuance of domestic dollar bonds aimed at bolstering liquidity in the country’s FX market.
According to data from the Nigerian Autonomous Foreign Exchange Fixing (NAFEX), the naira remained relatively stable, closing at N1,579.74/$.
The naira’s ongoing depreciation comes despite positive market signals, such as a 130% year-on-year increase in diaspora remittances, which reached $553 million in July 2024, according to the Central Bank of Nigeria (CBN). This influx of foreign currency was expected to alleviate some pressure on the naira.
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However, the inconsistency in the CBN’s foreign exchange distribution to Bureau De Change (BDC) operators has been cited by traders as a significant factor contributing to the naira’s persistent weakness and the volatility in the foreign currency market.
This erratic distribution is undermining confidence and contributing to the ongoing challenges facing Nigeria’s local currency.
The dollar saw a slight appreciation in early European trading on Wednesday, despite lingering near seven-month lows. Traders are closely watching for updates from the Federal Reserve, including the minutes from its latest meeting and revised payroll data, both of which could signal a potential rate cut in September.
The dollar index has dropped over 200 basis points in the past month due to falling U.S. bond yields and weak jobs data, raising recession concerns. Today’s anticipated payroll revisions and the Fed’s July meeting minutes could further influence market trends, with attention focused on the 101.00 mark for the DXY.