Naira Trends Positive as FX Turnover Slumps by 31%
FX Watch: There could be a better future ahead as the Nigerian naira starts to heal from losses sustained at the official and parallel markets in 2024.
The exchange rate at the official window is strengthening slowly despite an undervalued claim by the Central Bank of Nigeria (CBN) and other naira bulls like Goldman Sachs that predicted a fair value of N1200 and Financial Derivative’s N910.10 purchasing power parity estimate.
According to information obtained from the FMDQ platform on Tuesday, the naira appreciated by 0.78%, closing at ₦1,560.57 per US dollar, as data showed that the volume of US dollars transacted slumped by about 31%.
In the parallel market, the naira closed at ₦1,565 to the US dollar, ramping up gains after demand pressures were witnessed in the space last week. In what analysts tagged as a twin ‘gbola’ knockout, the local currency has suffered a devaluation and FX rate pricing methodology adjustment.
FX liquidity is the main challenge, analysts said in FX watch discussion with MarketForces Africa Zoom meeting today. “For us, the policies are good enough to set a new direction for the naira… It is unlikely to see an exchange rate below N1000 in 2024.”.
In the just concluded week, Coronation Research said in its market update that the exchange rate at the Nigerian autonomous foreign exchange market traded within the range of N1,425.3–1,650.0 but closed at N1,602.7 in the spot market.
This points towards an appreciation of +1.5% or +N24.6 over the week. In the forwards market, fx traded within the range of N1,600–NN1,869.2. In the 1-month contract, fx depreciated by -0.1% to close at N1,601.1 per US dollar. Traders said the 3-month contract depreciated by -1.4% to close at N1,641.0.
The naira closed at an average of N1,605 on Friday, according to a channel check. According to data from FMDQ, fx turnover, or the sum value of all transactions performed in the Nigerian autonomous forex market, decreased by -30.6%, or -USD77 million, to USD137.4 billion on Friday.
Meanwhile, the NAFEM window recorded an inflow of USD 617.4 million. Coronation Research highlighted that there was no inflow from the CBN in the previous week. A review of the FX supply in the market showed that foreign portfolio investors (FPIs) accounted for 40.4%, non-bank corporates accounted for 28.3%, exporters accounted for 24.9%, and others accounted for 6.5%.
In the global commodity market, the cost of oil saw an uptick, hitting a 4-month high. Brent crude elevated by 0.25% to attain $87.11 per barrel, a level last witnessed in Nov 2023. Also, West Texas Intermediate (WTI) crude similarly climbed by 0.24%, reaching $82.92 per barrel. #Naira Trends Positive as FX Turnover Slumps by 31% Naira Suffers Big, CBN Goes Ballistic Against FX Whales
