Naira Trades Weak at Official, Parallel Markets in May
In May, the Nigerian local currency weakened across the foreign exchange (FX) markets – both official and parallel markets amidst dollar scarcity and declining external reserve buffer.
Strong demand for the greenback driven by primary election spending put heavy pressure on exchange rates across the market. The parallel market rate worsened to N610 while the official rate crossed N420 during the month.
In the Investors and Exporters FX window, the N65 rebates offered to Exporters who trade through the window failed to stem the local currency from free falling.
Some currency traders are expecting the Central Bank of Nigeria (CBN) to devalue the naira on the ground that it is overvalued. CBN has maintained its stance not to devalue the naira due to weak macroeconomic metrics.
The apex bank FX market intervention has also declined below the pre-pandemic period as foreign investors’ FX backlogs remain unsettled. Amidst lower foreign currency inflows, the CBN triggered capital control measures to stem capital flight as external reserves dip.
At the end of May, the nation’s foreign reserve printed below $39 billion despite a $1.25 billion Eurobond raised by the Debt Management Office (DMO) in the first quarter of the fiscal year 2022. READ: Naira Skids at Official, Parallel Markets as Oil Receipts Underperform
Nigeria is expected to revisit the international debt capital market to complete the portion of foreign borrowings towards the financing of the 2022 budget deficit. Already, the agency has raised about N1.6 trillion from the local debt market.
With a steady rise in global oil prices, Nigeria has been unable to benefit from the windfall due to lower investment in oil infrastructure which results in weak production volume, Federal Government has said in a statement by the oil minister.
MarketForces Africa reports that Nigeria is 400,000 barrels per day behind the Organisation of Petroleum Exporting Countries (OPEC) and allies’ daily quota. On Tuesday, the Naira was exchanged at N419.50 to the dollar at the Investors and Exporters window, compared to 420.25 traded on Monday, representing 0.18 per cent appreciation.
The open indicative rate closed at N418.58 to the dollar on Tuesday. An exchange rate of N444.00 to the dollar was the highest rate recorded within the day’s trading before it settled at N419.50. The Naira sold for as low as 412.38 to the dollar within the day’s trading.
A total of 98.52 million dollars was traded in foreign exchange at the official Investors and Exporters window on Tuesday. # Naira Trades Weak at Official, Parallel Markets in May
