Naira Rallies on $60m Interbank FX Turnover
The naira rallied against the US dollar at the Nigerian foreign exchange market (NFEM) on Monday, reflecting improved liquidity in the official window. The naira climbed to N1365, according to the daily FX published by the Central Bank of Nigeria, from N1374.94 at last week’s close.
The spot rate reached an intraday high of N1374.5000, which was a significant improvement from the previous rate quoted in the official window. The naira also touched an intraday low of N1362 amidst growing interbank FX turnover.
According to the CBN daily FX report, interbank FX turnover at the official window approached $60 million on Monday, reflecting increased market activities. NFEM interbank turnover printed higher at $39.933 million on Monday across 85 deals, up from $58 million last week.
Sufficient FX liquidity has continued to keep the naira stable. The local currency stayed strong despite 83% decline in CBN FX intervention in April to $150 million from $985 million in March.
Last week, the Naira slipped by 1.20% at the official window, closing at N1,374.94/US$1 compared to N1,358.44/US$1 in the previous week.
This followed a relatively weaker midweek performance, during which the currency traded to an intraweek high of N1,379.46/US$1 before moderating towards the close of the week, Coronation Merchant Bank’s research unit said in a note.
The parallel market, however, recorded a flat performance, with Naira remaining at N1,400.00/US$1. At current levels, the parallel market trades at a slight premium of 1.82% relative to the official NFEM rate.
Analysts said that as of the end of the week, total FX inflows totalled US$0.52 billion. Foreign portfolio investors (FPIs) accounted for the largest share, contributing US$0.25 billion (47.1%) of total inflows.
The exporters/importers accounted for US$0.18 billion, non-bank corporates for US$0.07 billion, and other sources (including FDIs and other corporates) for US$0.02 billion.
The Naira is likely to remain range-bound but under mild pressure in the week ahead, Coronation said, adding that the key support factor is the continued CBN OMO strategy.
“Liquidity mop-ups typically attract foreign portfolio investors who bring US Dollars into the system to take positions in high-yield instruments, and with bond yields rising to 15.94% ahead of the N700 billion auction, there is an incentive for fresh FPI Dollar inflows”, Coronation said.
On the downside, the research unit said the declining reserves trajectory gives the CBN less room to intervene too aggressively, while elevated oil prices, though positive for Nigeria’s export earnings over the medium term, are in the near term feeding energy cost inflation, which complicates the Naira’s stability.
The tight parallel market premium of 1.82% is a stabilising signal, but any further reserve drawdown or a pullback in FPI appetite could quickly widen that spread, analysts said. NNPC Signs Deal to Restart, Expand Warri, Port Harcourt Refineries
