In the exciting match of the CAF AFCON 2023 semifinals on February 7, 2024, Nigeria’s Super Eagles thrilled the nation by defeating South Africa. However, amidst the celebrations, Nigeria faces economic challenges as the value of its currency, the Naira, continues to decline against the US Dollar.
Source : https://bit.ly/42wWdz6
This decline in the Naira’s value can be attributed to the backlog of demand for foreign exchange (forex) on the official market, managed by the Central Bank of Nigeria (CBN). As a result, individuals and businesses are forced to resort to the black market to obtain dollars. Additionally, Nigeria heavily relies on revenue from oil exports, which account for more than 90% of its export income. Based on direct communication data from the oil cartel, Nigeria’s crude oil production decreased to 1.25 million barrels per day from 1.35 million barrels per day in October 2023. ( Source : https://www.premiumtimesng.com/business/651345-nigerias-crude-oil-production-dropped-in-november-opec.html
Decreasing oil exports result in fewer US Dollars entering the country, leading to an appreciation of the Dollar and consequently, a depreciation of the Naira due to increased demand for Dollars.
On June 14, shortly after Nigeria’s new president, Bola Tinubu, suspended the embattled governor of the Central Bank of Nigeria, Godwin (Ifeanyi) Emefiele, authorities lifted significant currency restrictions in Nigeria’s official forex market. This move caused a significant devaluation of the overvalued Naira, bringing its value closer to that of the black-market rate.
The Central Bank of Nigeria announced the abolition of segmentation in the forex market, consolidating all segments into the Investors and Exporters window. This new market model, known as the “willing buyer, willing seller” model, operates within the Investors and Exporters (I&E) window. It allows for forex trades to be conducted at rates determined by market conditions to ensure efficient price discovery within Nigeria’s forex market.
Source : https://internationalbanker.com/brokerage/what-a-devalued-naira-means-for-the-nigerian-economy/
Source : https://www.investing.com/currencies/usd-ngn-chart
From a technical analysis perspective , on February 7, 2024, at 16:34.48 GMT, the price of 1 USD was 1413.070 Naira, slightly lower than its all-time high of 1422.672 Naira per USD on February 6, 2024, as observed in the USD/NGN daily chart published on investing.com powered by tradingview.
An upward trendline drawn from 461.600 (June 14, 2023) rejected the price at 785.962 after it retraced from 882.069. Following the rejection at 785.962, the price has been strongly trending upward and is currently around 1413.070, nearing the all-time high of 1422.544.
Source : https://www.investing.com/currencies/usd-ngn-chart
In the 4-hour timeframe, 1422.544 is seen as resistance and 1400.000 as support. Trading within this range implies buyers will purchase at the support level, and sellers will sell at the resistance level. Breaking above the resistance suggests a higher likelihood of a continued uptrend, while breaking below the support indicates a potential reversal of the current uptrend.
