Naira Depreciates to N1,635 as Market Awaits Retail FX Sales
The Nigerian naira depreciated against the dominant foreign currency, the US dollar, in the foreign exchange (FX) market again amidst rising external reserves versus expected retail FX sales in October.
According to spot data from the FMDQ platform, the naira depreciated by 0.24%, closing at ₦1,635.15 per US dollar on the back of an imbalance between demand and supply of foreign currency. The exchange rate at the Nigerian autonomous foreign exchange market is projected to improve on expectations that the Central Bank (CBN) FX intervention.
Analysts expect the naira to gain weight as exchange rate approach a level that often force the CBN to conduct market wide FX sales to currency traders in the informal and official market.
Meanwhile, it is not clear whether there will be retail Dutch Auction System in Oct. The authority re-launched Dutch FX auction sales in August but the market record no sales in September.
“There is policy inconsistence in managing the exchange rate under the current CBN leadership,” a senior financial expert said in a chat with MarketForces Africa. Analysts maintained that the naira cannot rebound without a solid FX liquidity boost across the currency markets.
Accretion into external reserves has increased the gross balance to #38.697 billion. Due to sustained US dollar inflows, the balance in gross external reserves could cross $39 billion in Oct, analysts said.
Last month, the CBN spent about $544 million to defend the naira through FX spot auction sales to local deposit money banks to reduce liquidity pressures. Despite this, the naira closed negative as demand eclipsed the US dollar volume available on the supply side.
Meanwhile, the Naira slipped to ₦1,655 per US dollar in the parallel market due to growing demand for invisible foreign currency payments by the locals. Elsewhere, the price of oil rose by more than 3% as the market anticipated a potential strike by Israel on Iran. Brent prices increased by 3.50% to $80.80, while WTI prices increased by 3.59% to $77.03.
In contrast, gold prices decreased as the U.S. dollar remained solid, and recent employment data caused investors to lower their expectations of a significant rate cut from the Federal Reserve in November. Currently, the price of gold is at $2,664.50 per ounce. #Naira Depreciates to N1,635 as Market Awaits Retails FX Sales FG Earmarks N47.5bn for Upgrade of 50 Selected Schools
