The Nigerian naira started the New Year sourly, tumbling 8.97% against the dollar on Tuesday, January 2, 2024.
The currency closed at N988.46/$1, despite a $2.25 billion injection from the African Export-Import Bank (Afreximbank) to ease the country’s forex crunch.
The depreciation came even as Afreximbank disbursed part of its $3.3 billion foreign exchange support facility to the Nigerian government.
The facility is intended to address the acute liquidity shortage in the FX market, since the unification of the FX market by the Central Bank of Nigeria (CBN) on June 14, 2023.
The domestic currency depreciated 8.97% to close at N988.46/$1 to a dollar at the close of business on Tuesday, according to daily FX tracker compiled with data obtained from the NAFEM official window.
This represents an N81.35 loss or a decline of 8.97% by the Naira decline when compared to the N907.11 it closed on Friday.
The intraday high recorded was N1130/$1, while the intraday low was N744.50/$1, representing a wide spread of N385.50/$1.
According to data obtained from the official NAFEM window, forex turnover at the close of the trading was $15.38 million, representing 82.78% decrease compared to the previous day.
Similarly, the naira depreciated at the parallel forex market where it exchanged at N1,220/$ a 0.41% depreciation when compared to N1,215/$ on the last trading day of December 2023, while peer-to-peer traded at N1,209.75/$ representing 0.89% decline from the N1990/$ on the last trading in December 2023.
What you should know
Afreximbank’s release of $2.25 billion out of the $3.3 billion foreign exchange (FX) support facility to Nigeria’s FG to relieve the acute liquidity shortage in the country’s FX market, hasn’t shown any positivity as traders maintain their positions.
This pivotal agreement was officially signed on December 29, 2023, marking a milestone in the financial cooperation between the involved entities, who also recently signed a $150 million deal.
In this strategic financial arrangement, Afrexim Bank, fulfilling its role as the Mandated Lead Arranger, works in close coordination with the United Bank for Africa, which assumes the responsibility as the Local Arranger.
The facility was successfully finalized with NNPC Limited acting as the principal financier.
The arrangement also includes Guvnor and Sahara Energy as key participants in the transaction, highlighting the collaborative effort of multiple stakeholders.
The total transaction value is US$3.3 billion, a facility obtained through Afrexim bank to help boost dollar supply towards alleviating Nigeria’s current FX supply challenges in the NAFEM official trading window.
The first tranche of the transaction amounts to US$2.25 billion. This sum will be deposited into a designated account at the Central Bank, and it is expected to ease forex liquidity pressures.
UBA is also functioning as the Onshore Depository Bank for this arrangement.
The Nigerian National Petroleum Corporation (NNPC) is facilitating the financing of this transaction, acting as a lender. Other major oil trading firms involved as sub-lenders include Sahara Energy, Vitol, Oando, and Gunvor.
