According to Fitch Ratings, Nigeria’s foreign exchange market continues to face instability despite various interventions from the Central Bank of Nigeria (CBN).
The rating agency stated this in its latest report published on its website.
Fitch noted that although the Central Bank of Nigeria has made efforts, the pressure on the naira is still high.
The agency stated:
Fitch noted that the CBN has raised the monetary policy rate five times, cumulatively increasing it by 850 basis points to 27.25% since February 2024.
Despite these measures, the agency believes that the FX market has not yet stabilised, and the flexibility of the exchange rate remains untested.
The recent increase in Nigeria’s gross FX reserves, which rose to $39 billion in mid-October from $32.1 billion in mid-April, was attributed to official disbursements, remittances, portfolio inflows, and an improved trade balance.
Fitch forecasts FX reserves to rise to 6.1 months of current external payments by the end of 2024.
However, the agency raised concerns about the net reserves position, estimating that approximately 25% of current gross reserves are tied up in FX swaps with local banks. Fitch remarked:
Earlier, TimesNow.com.ng reported that the CBN revealed that Nigeria’s foreign reserves had increased.
This came after the successful 500 million dollar bond issuance, which signifies investor confidence.
The increase would be a welcome development for the Central Bank of Nigeria in its fight to help the naira recover in the foreign exchange market.
Shortage of forex supply has always been a major reason the naira has come under intense pressure in both the black and official markets.
Proofreading by Nkem Ikeke, journalist and copy editor at TimesNow.com.ng.
Source: TimesNow.com.ng
