Naira Bottoms Out Again as FX Crisis Tests CBN Resolve
The naira experienced a huge value decline across forex markets as sustained demand for the US dollar began to test the Central Bank of Nigeria’s (CBN) resolve not to defend the local currency.
Exchange rate predictions at the official and informal markets have become very unpredictable, and the outlook skews to the downside due to Nigeria’s FX liquidity challenge.
Following the authority re-affirmation of its willing buyer, willing seller in April, the naira has been on decline successively due to sustained US dollar scarcity in the forex markets.
At the Nigerian autonomous foreign exchange market, the naira closed at ₦1,561.98 per US dollar, representing a 1.92% decline from the previous close.
FX analysts maintained that FX liquidity, or the volume of US dollars available at the official window remains sole determinant of spot rate pricing. For third weeks in a roll, the naira has come under intense pressures while the gross external reserves continue to surge.
Inflows into the nation’s gross external reserves lifted the gross balance above $35 billion on Monday, the level seen last in June, 2023 when flood of US dollar accretion boosted the CBN FX reserves balance.
In the parallel market, the naira depreciated by 1.96%, ending the day at an average of ₦1,559 per US dollar. The depreciation of the local currency in the black market was attributed to rising foreign currency demand by invisible FX demand for international payments for goods and services.
“We expect volatility to persist”, AIICO Capital Limited said in an update on Wednesday. In the global commodity market, oil prices rose today as U.S. inventories declined, while OPEC sees solid demand supported by stronger economic growth this year.
As a result, Brent prices increased by 1.03% to $85.53, while WTI prices increased by 1.38% to $82.53. Additionally, gold prices rose by 0.10% to $2,365.00 per ounce at the time of this report.
The American greenback stormed through the forex board, ravaging virtually every rival currency’s valuation on Wednesday amidst uncertainties over US Fed rate cut in Q3-2024 #Naira Bottoms Out Again as FX Crisis Tests CBN Resolve Universal Insurance Projects N20bn Premium Income for 2024
