The naira rose slightly versus the US dollar on October 3, 2024, closing at N1,659.26 in the official Investor and Exporter (I&E) window, despite increased market activity.
In an effort to draw $5 to $10 billion in short-term investments, the Nigerian government is advancing a tax reduction program for deep-water oil and gas projects, which results in a 0.59% increase from the rate of N1,669.15 on October 2, 2024.
Market turnover increased to $450.39 million, a 155% increase from the $176.45 million recorded the day before, while the naira enjoyed a small uptick.
Key Data Points
Closing Exchange Rate: On October 3, the naira concluded trading at N1,659.26 per dollar, reflecting a 0.59% increase from the previous close of N1,669.15.
Intra-Day Highs and Lows: The naira exhibited volatility during the session, peaking at N1,696.00 and dipping to N1,601.48 before stabilizing at N1,659.26.
Market Turnover: The I&E window experienced a significant surge in turnover, reaching $450.39 million, up from $176.45 million the day before. The total turnover for September amounted to $3.3 billion.
Parallel Market Rates: In the parallel market, the naira opened at N1,669.49 against the dollar, fluctuating between a high of N1,673.34 and a low of N1,645.00 before closing at N1,645.00.
Market Dynamics
The naira’s price moves in September continued to be slow as it tried to stabilise in the face of volatile market conditions. The value of the naira has been unstable since March when it last traded around N1,300 to the dollar.
September saw additional devaluation of the naira, which had been trading at about N1,500 in August. The naira has lost around 75% of its value this year, a decrease mostly attributable to rising inflation and a rise in demand for foreign exchange.
However, Nigeria’s foreign reserves showed little improvement, going from $36.305 billion at the end of August to $36.730 billion by the middle of September.
What To Note
The Nigerian government has announced a tax incentive package for the oil and gas industry. The goal is to invest $5 to $10 billion in deep-water offshore activities in the near future.
These tax concessions include large exemptions for compressed natural gas (CNG), diesel, and cooking gas and fiscal incentives to stimulate investments in deep-offshore oil and gas projects.
Expectations
The federal government’s tax relief measures and VAT exemptions for deep-water oil and gas projects will likely draw greater investment into the sector.
The naira will likely receive additional support from this increased investment, which is expected to raise production and export potential.
Significant events like these tax breaks are predicted to improve the market perception of the naira and the economy.
