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•As crude oil price hits $97 …FX transactions dip 8.34%
By Chinwendu Obienyi
Nigeria’s naira fell to an all-time low at the parallel market on Thursday, trading at N1008/$1 largely due to speculative demand as businesses turned to the dollar as a store of value.
This is even as a recent assessment of oil prices conducted revealed that the brent crude had surged to $97.24 per barrel, marking its highest point since November 2022.
According to abokifx, the dollar which traded at N1000, closed at N1008 and this has led to concerns that the present administration is still struggling to solve the challenge of FX.
Daily Sun had earlier reported that with speculative activities and excess demand being shifted to the informal market, the widening gap between the official market and parallel market has increased to about N252.92.
Currently, the country faces acute shortage of foreign currency and the newly appointed Central Bank of Nigeria (CBN) Governor, Yemi Cardoso, has stated that his immediate priority is to clear the FX backlog to ensure dollars are available to end users.
The Minister of Finance, Wale Edun, had noted that the currency’s weakness followed CBN’s backlog of about $6.8 billion in the foreign exchange market.
Although the Federal Government has said it is working to attract liquidity from foreign investors who are already apathetic investing in Nigeria, the oil-for-dollar loan programme that would have allowed the state oil company to receive $3 billion from the African Export-Import Bank (Afreximbank) for a liquidity injection has yet to materialise.
This is not surprising as Afreximbank is reportedly tapping some oil traders to enable the financing of the $3 billion emergency cash-for-crude oil repayment loan to the Nigerian National Petroleum Company Limited (NNPC), a loan that was adjudged central to the country’s efforts to support the falling naira.
Economic analysts, while reacting to the development, noted that the expected consequence of the subsidy and the unification of exchange rate, has failed to have its impact on Nigerians. President Bola Tinubu had terminated fuel subsidies in May 2023, however, the recent surge in global crude prices, coupled with ongoing foreign exchange market turmoil, has reignited discussions about the presence of fuel subsidies.
This speculation stems from the fact that fuel pump prices continue to range from N615 to N620 per litre, even as the nation remains dependent on imported refined petroleum products.
Hence, with brent crude inching close to $100 per barrel, it is imperative to note that Nigeria is grappling with a pressing need for revenue, prompting a critical evaluation of whether camouflaging fuel subsidies serve the country’s public finance better than prioritising augmented oil production to capitalise on the current upswing in crude prices.
Also, the Domestic and Foreign Portfolio Investment (FPI) report for the month of August which is prepared on a monthly basis by NGX Regulation Limited, with trading figures from market operators on their Domestic and FPI flows, revealed that total foreign transactions decreased marginally by 8.34 per cent from N40.54 billion (about $52.58 million) to N37.16 billion (about $47.94 million) between July 2023 and August 2023.
