Naira Swings to N794 on CBN Total Reform Plan
Exchange rates across the foreign exchange markets swing in different directions amidst a plan by the Central Bank of Nigeria (CBN) to boost the purchasing power of the local currency.
At the Nigerian Autonomous Foreign Exchange Market, the US dollar was sold for less than N800 amidst a plan by the apex bank to clear the remaining FX backlog.
Yemi Cardoso, the Central Bank of Nigeria (CBN) Governor said at bankers dinner that in order to ensure the proper functioning of domestic and foreign currency markets, clear, transparent, and harmonized rules governing market operations are essential.
“New foreign exchange guidelines and legislation will be developed, and extensive consultations will be conducted with banks and FX market operators before implementing any new requirements.
“We have already witnessed improvements in FX market liquidity in recent weeks, as the market responded positively to tranche payments which have been made to 31 banks to clear the backlog of FX forward obligations.
“We have been subjecting these payments to detailed verification to ensure only valid transactions are honoured. In a properly functioning market, it is reasonable to expect significant FX liquidity, with daily trade potentially exceeding $1.0 billion”, Yemi Cardoso said at the annual bankers’ dinner in Lagos.
Data from the FMDQ Platform showed the exchange rate closed at N794.84 per US dollar. At the parallel market, the naira weakened ₦1,150.00.
Currency traders at Afrinvest Limited in a weekend note said activity level in the NAFEM window improved by 11.1% week on week to $817.7 billion from $736.3 billion in the prior week.
Data from the Central Bank website showed that external reserves declined further despite marginal recovery in the commodities market.
Brent crude oil price futures inched higher by 1.4% to close at $81.75/bbl., as traders remained on the sideline ahead of OPEC+ meeting.
The anticipated meeting would focus on output cut agreements for 2024, following a recent downturn in oil prices due to strong supply from non-OPEC producers.
Nigeria’s FX reserve maintained its downward trend as the gross reserves declined by USD98.78 million on weekly comparison to close at USD33.20 billion.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts of the Naira remained at $4.2 billion.
“We do not foresee any changes given that CBN has cleared all Non-Deliverable Forwards (NDFs) open contracts, shortly after rendering contracts for tenors between one and twelve months inactive in response to reforms in the NAFEM window.
“In the coming week, we expect rates across different FX segments of the market to depreciate following demand-supply imbalance”, Afrinvest said in its note to investors. Naira Devaluation Deepens Economic Crisis in Nigeria
In the forwards market, the naira recorded depreciation across the 1-month (-5.1% to N911.07/USD), 3-month (-5.5% to N941.38/USD), 6-month (-6.9% to N984.57/USD) and 1-year (-5.0% to N1,028.36/USD) contracts.
