Naira Gains as CBN Rallies FX Intervention
The exchange rate at the Investors’ and Exporters’ foreign exchange (FX) market settled at N462 in April amidst negative movement in external reserves.
In April, the activity level in the official Window declined 48.9% to $1.5 billion from $2.8 billion in the previous month, according to foreign exchange analysts’ records.
Against US dollar index, the naira improved by 0.06% in the last five days, the exchange rate has seen its worst in the year at N464.50.
Keeping to its policy stance, the Central Bank of Nigeria (CBN) weekly forex sales however remains supportive of the positive movement in spot rates.
With 5-day gains standing positive, Naira edged out other major foreign currencies in the market, including Great Britain Pounds, Japanese Yen (1.41%) and even Euro
Despite higher crude oil prices, inflows into Nigeria’s external reserves has been unimpressive in stark contrast to higher demand for foreign currency.
Oil price movement rebounded to $76.85 per barrel in the midst of increasing fear of recession and high booking of the Chinese ahead of May holiday.
However, on the home front, data from the CBN data bank showed that the Bonny Light crude price plunged by 3.90% or $3.44 week on week, to close at $84.71 per barrel (April 26) from $88.15 per barrel in the previous week
Across foreign exchange markets, FX traders said it was a positive outing for the naira, edging strongly against the pressure from a sustained increase in demand for the United States dollar in particular.
At the parallel foreign exchange market, exchange rate appreciated by N1 or 0.27% week on week to close at N739 from N738 in the previous week.
Also, at the investors’ and exporters’ FX window, the Naira edged out the United States dollar by N0.67 or 0.14% week on week to close at N463 from N463.67 the previous week.
Market data from the FMDQ platform indicate that traders in the market maintained bids between N463 and N467 on the back of a weakening dollar against peer currencies.
A look at activities at the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchanged closing at N462.
Spot exchange rate movements suggest that the US dollar reign across all forward contracts with depreciations reported for the Naira across various contract tenor gauges.
Analysts at Cowry Asset Management Limited said in a report that the Naira lost strength by 0.23%, 1.16%, 1.30%, 1.92% and 0.79% week on week to close at contract offer prices of N469.74, N484.66, N496.22, 526.22 and N565.24.
Analysts at Cowry Asset said next week, they expect the naira to trade in a relatively calm band across various market segments barring any market distortion and as the apex bank continues its weekly FX market intervention.
As the apex bank sustained its market intervention, the balance in Nigeria’s gross external reserve declined by $47.83 million to close at $35.26 billion.
“We believe FX liquidity issues will remain over the short-to-medium term as we do not see any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels”, Cordros Capital analysts said.
Analysts spot that there has been tepid accretion to the reserves given low crude oil production and elevated PMS under-recovery costs.
Foreign portfolio investors (FPIs) who have historically supported supply levels in the Investors, exporters’ FX window will be needed to sustain FCY liquidity levels in the medium to long-term, analysts at Cordros Capital stated. # Naira Trades at N463 as CBN Rallies FX Intervention
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