How Nigeria's external reserves increased by $110 million in 24 hours

• Nigeria’s foreign exchange reserve has risen to $34.7 billion, adding $110 million in 24 hours
• The reserve has gained about $316 million in the first seven days of this month
• The development has seen the naira appreciate in the official market to N1,509.66 per dollar as against the N1,520 it traded the previous day

Legit.ng’s Pascal Oparada has reported on tech, energy, stocks, investment, and the economy for over a decade.

Data from the Central Bank of Nigeria (CBN) shows that Nigeria’s foreign exchange reserve has reached a new high of $34.7 billion after adding $110 million in 24 hours.

The reserve has gained about $316 million since the beginning of July.

Nigeria experiences a rise in FX reserves at $316 million in one month. Credit: picture alliance/Contributor
Source: Getty Images

The factors leading to the rise in FX reserves

The growth is due to several factors, including rising oil prices, improved diaspora remittances, and CBN’s plan to stabilize the local naira.

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Analysts see the rise in FX reserve as a positive development for Nigeria’s economy, providing a buffer against external shocks and supporting Nigeria’s ability to meet its financial obligations.

According to reports, Fitch Ratings upgraded Nigeria’s economic prospect to positive, citing significant reforms that have restored confidence and macroeconomic stability and enhanced policy coherence and credibility.

Nigeria’s economy rated favourably

Nigeria’s apex bank has taken several measures to manage the FX market, including introducing the Investors’ and Exporters’ window, attracting foreign investment, and enhancing reserves.

These reforms have resulted in a return of sizeable inflows to the official FX market and a significant increase in foreign portfolio investment inflows.

The naira appreciates against the dollar

The development comes as the naira appreciated against the US dollar on Friday, June 5, 2024, to trade at N1,509.67 per dollar, up from the N1,520 it traded the previous day.

Data from the FMDQ Exchange shows that currency dealers quoted the naira at a high of N1,535 per dollar and a low of N1,450.

Daily forex turnover at the Nigerian Autonomous Foreign Exchange Market (NAFEM) stood at $116.88 million on Friday, June 5, 2024.

According to Ishaya Ibrahim, a financial expert and journalist, the rise in Nigeria’s FX reserves is good news as it will increase investors' confidence in the country's forex market.

“Most investors look at the size of a country’s reserve before deciding whether or not to invest. That is where big economies are better because the more significant the size of your reserves, the more investors you attract.“However, the CBN and the Nigerian government need to work hard not to deplete it fast enough as a good reserve serves as a honey pot for portfolio investors,” he said.

Dollar Inflow Rises by 74%

Legit.ng earlier reported that the volume of dollars traded in the Nigerian Foreign Exchange Market (NAFEM) increased yearly by 74% to $22.88 billion in the first half of 2024 from $13.11 billion recorded in the same period in 2023.

Analysis of quarterly transactions in the official market from FMDQ Exchange shows that FX turnover stood at $12.64 billion in the first quarter of 2024 and dipped quarterly by 19% to $10.24 million in the second quarter of 2024.

However, a weekly analysis of June transactions in the official market shows that turnover stood at $1.05 billion in the first week of June, dropping by 21% weekly to $823.75 million in the second week of June.

Source: Legit.ng