Naira Mixed as Market Anticipates FX Boost from Exporters Inflow
The naira exchange rates mixed across foreign exchange (FX) markets amidst expectation of improved inflows from exporters. According to data obtained from the FMDQ platform, the naira depreciated by 0.4% to N1, 548.89 per US dollar at the Nigerian Autonomous Foreign Exchange Market.
Traders said transactions were consummated within the N1,543 to N1,550.00 range today, higher than the previous level seen in the currency market. The exchange rate is crawling back in the official window after the December rally, analysts said, attributing the retracement to tight liquidity in the currency market in the absence of FX interventions.
In the latter part of 2024, the Central Bank of Nigeria (CBN) boosted the naira exchange rate against the US dollar with aggressive FX intervention sales to authorised dealer banks. However, as the CBN relaxes its FX auction, the naira has begun to weaken against the greenback. Towards the end of last week, the CBN returned to the market, selling $50 million to banks to boost FX liquidity.
Despite this, the exchange rate worsened by about N9, suggesting a subpar FX intervention amidst surging US dollar demand. A slew of analysts believe that the exchange rate could worsen further this week if the CBN fails to defend the naira appropriately.
In a chat, financial analysts said the naira exchange rate movement depends heavily on the supply side’s strength. Without CBN support, the naira could take a beating and return to ‘Old Avenue’.
Export Proceeds to Boost FX Supply
On the positive side, analysts have revealed positive expectation that the suspension of exporter FX receipts repatriation extension would boost the supply side. Last week, the CBN announced the immediate suspension of approvals for extensions on the repatriation of export proceeds, marking a significant step to enforce compliance with the country’s foreign exchange regulations.
In the past, the authority has warned exporters from re-routing export proceeds, a practice deployed in a bid to circumvent the system.
In a circular dated January 8, 2025, the apex bank clarified that the directive applied to both oil and non-oil export transactions. The circular emphasised that exporters must adhere to existing timelines for repatriating export proceeds. Non-oil export proceeds must be repatriated within 180 days of the bill of lading date, while oil and gas export proceeds have a 90-day deadline.
These timelines were now deemed non-negotiable. Nigerian banks were required to draw the attention of their customers to the provision of existing regulations and ensure compliance. In the parallel market, the naira gained N5 to close at N1655 per greenback as FX demand for invisible payments picked up momentum.
Oil prices continued to rise for the third consecutive session, with Brent crude surpassing $80 per barrel, reaching its highest level in over four months. This increase was fuelled by expanded U.S. sanctions on Russian oil and the anticipated impact on exports to major buyers like India and China. Brent crude was quoted at $81.03 per barrel, while WTI hovered around $78.00.
Conversely, gold prices dipped as the U.S. dollar soared to a two-year high following a strong jobs report last week, reinforcing expectations that the Federal Reserve will be cautious about cutting interest rates this year. #Naira Mixed as Market Anticipates Boost from Exporters Inflow CBN Opens FX Window for BDC to Stock up at NFEM Rate
