The Naira strengthened significantly in the Nigerian Autonomous Foreign Exchange Market (NAFEM), reaching N838.95 against the dollar, up from N890.54 last Friday. The currency rate fluctuated during the week, reaching a low of N1,089.51/US$ on Tuesday and a high of N856.57/US$ on Monday. In the peer-to-peer (P2P) market, the Naira traded about N1,272/$ on Monday, up from N1,255/$ over the weekend.
Simultaneously, data from the Central Bank of Nigeria (CBN) disclosed a decrease in Nigeria’s gross official reserves, dropping by US$91.6 million to USD32.9 billion in December 2023. This indicates a decline of approximately US$4.2 billion throughout 2023, with an average monthly depletion rate of -USD348 million. Analysts attribute this downward trajectory to robust demand for foreign exchange, feeble accretion from export proceeds—primarily crude oil—and a decline in foreign portfolio inflows.
The positive momentum in the NAFEM suggests a potential resilience of the Naira against external pressures, even as the exchange rate experienced fluctuations during the week. However, the concurrent decline in the country’s official reserves raises concerns about sustained economic stability, prompting a closer examination of the factors contributing to the significant reduction observed in 2023.
