Exchange Rates Plunge after CBN Calls Naira Undervalue
The Nigerian naira exchange rates across the foreign exchange (FOREX) markets tumbled as the volume of foreign currency supplied was insufficient to meet the total US dollar demand for eligible transactions.
Despite rising import bill payment requests logged at the Nigerian autonomous foreign exchange market (NAFEM), the supply side remained depressed, keeping the exchange rates in tight movement against the dominant US dollar.
According to data from FMDQ, the total volume of US dollars traded or turnover at the autonomous FX market declined by 14.4% or USD 94.8 million week on week to USD 565.8 million on Friday.
The NAFEM window recorded an inflow of US$34.45 million last week as there were no injections made by the CBN for the 15th consecutive week, Coronation Research said in a market update sent to clients via email.
However, analysts noted that foreign portfolio investors (FPIs) accounted for 12.34% of the total US dollar volume supplied. Also, non-bank corporates accounted for 46.39% while exporters accounted for 38.44%, and others accounted for 2.9%. Data from the FMDQ FX platform showed that the Naira weakened further Thursday as the market discounted the Central Bank of Nigeria (CBN) naira undervaluation tantrum.
Yemi Cardoso told a conference that currently the local currency is trading below its fair value across forex markets. In contrast, some investment firms are projecting that the exchange rate will cross N1000 in the official market in 2024.
The growing naira bears have sent negative signals to FX users across the nation as the gap between the official and parallel market crossed N50% last week. Against the US dollar, the Naira depreciated by 2.12%, closing at N900.96 per US dollar in the official market and also experienced a fall by 3.54% in the parallel market, closing at N1,405 per dollar.
Meanwhile, the commodities market continues to reverberate amidst uncertainties in the Middle East, pushing prices of crude oil higher.
Brent crude futures surged to over $81 per barrel on Thursday, nearing a two-month high after data showed US crude stocks declined sharply. The West Texas Intermediate (WTI) traded above $76 per barrel as concerns over supply disruptions persisted.
US and UK coalition launching strikes against Houthi fighters in Yemen, who have been targeting commercial shipping in the Red Sea. #Exchange Rates Plunge after CBN Calls Naira Undervalue Naira Steadies as Banks Issue Update on FX Purchase
