Naira Trades at N1535, Forward Market Contracts Rates Appreciate
The naira traded at N1535 per US dollar in the Nigerian foreign exchange market, NFEM, on Friday after year-end aggressive FX sales to banks bolstered liquidity levels at the supply side.
The spot rate has been relatively stable around the current range as the Central Bank (CBN) continues its fast and furious FX intervention sales to banks as part of efforts to boost liquidity.
To achieve market-wide exchange rate stability, the CBN also extended temporary FX sales priced at the official rate to bureau de change (BDC) operators in the informal currency market.
According to AIICO Capital Limited, FX transactions were consummated between N1,520 and N1,550, with enhanced activity midweek at N1,538.00 to N1,545. By week’s end, liquidity remained strong, with trades narrowing to N1,531.00 and N1,540.00.
In the parallel market, the local currency lost N15 per greenback, closing at N1,655 on Friday even after the authority allowed BDCs to buy $25,000 at the official rate from banks. Hence, the spread between the two markets widened to 7.82% from 6.84% the previous week, TrustBanc Financial Group Limited said in its note.
In the forwards market, the naira rates appreciated across contracts as traders expected the CBN to keep back the naira, according to an update from Cordros Capital Limited. Forward market contract for 1-month appreciated by 0.3% to N1,573.93 on each US dollar deal, reflecting market positive expectation on the local currency.
Analysts also reported that the 3-month forward contract rose by 0.5% to N1,631.60 per US dollar, the 6-month FX contract gained 0.9% to N1,711.77 and the 1-year appreciate by 1.9% to N1,880.59.
Last week, the gross balance in Nigeria’s foreign reserves reached $40.884 billion amidst positive expectation of additional inflows amidst uncertainties in the global commodities market. Last week, oil prices experienced weekly increases, supported by expectations of additional economic stimulus in China and declining U.S. interest rates.
Brent crude reached a price of about $76.51 per barrel, while US benchmark West Texas Intermediate (WTI) was around $73.96, recording weekly gain across complex.
Elsewhere, gold prices pulled back from a three-week peak, influenced by a strong dollar, as markets prepared for potential economic and trade changes under U.S. President-elect Donald Trump. Gold was priced at around $2,637.78 per ounce. #Naira Trades at N1535, Forward Market Contracts Rates Appreciate
