This week, the Nigerian Naira gained against the US Dollar in the parallel market. Naira strengthened against the US dollar last week to a 2-month high of N535/$1 at the black market, thereby reducing the gap between the parallel and the official rates; an uptick that was driven by a significant drop in demand for FX at the black market.

The Naira/Dollar exchange rate, which had hovered around N570 to N572 to a dollar since September, gained over 600 basis points to N535/$1 in the early hours of Thursday, last week as BDC operators hinged it to improved forex liquidity and decrease in demand. It currently trades between N545-N550 at the black market depending on who you buy from.

Tye following 3 major reasons have been pointed as the cause for this Naira positive position in the past week:

1. FX, Foreign Reserve Risedue To Borrowings
The foreign reserve enjoyed a boost to over $40 Billion over the week owing to some factors like the the $4 Billion Eurobond secured and approved. The Forex availability helped the apex bank CBN to have huge FX to play with and intervene in the I&E window leading to influx of FX and this helped the Naira.

Just as the nation secured eurobonds, some notable corporate organisations like Access Bank and Fidelity Bank also secured $500 million and $400 million respectively.

2. Crude oil price boost
Year to day, the crude price has gained over 60% increase and this has impacted Nigeria foreign reserve and FX earnings greatly. This is greatly because crude oil exports represent 90% of Nigeria's FX earnings. So, any movement in the oil price globally will impact Nigeria's position significantly. Many thanks to the OPEC that acts efficiently to control the oil supply so as to regulate the price appropriately.

3. Cryptocurrency adoption
Yes, you read it right. Even in the middle of the crackdown by the apex bank CBN on crypto operations in the nation and introduction of alternative enaira, the adoption fee f bitcoins has impacted Nigeria's FX position positively. This is due to the FX inflow impact. The surge in crypto adoption in Nigeria has this good side.

Talking of sustainability, this is hard to say. Nigeria needs to diversify the economy more and encourage and support more export. This way, the nation can be sure of sustainable positive movement of the Naira strength. Otherwise, we will continue to witness zigzag.

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