Naira Drops as US Dollar Demand Surpasses FX Supply
The naira dropped against the US dollar at the Nigeria foreign exchange market (NFEM) on Thursday, driven by intermittent increase in foreign currency demand from corporate users and other market players.
The Central Bank of Nigeria (CBN) updated foreign exchange data showed that the naira closed the day at N1502.1311 per dollar, depreciated from N1,500.9152 quoted the previous day.
The local currency hit an intraday high of N1503.5000 while spot rate ended at N1503 due to relatively weak US dollar liquidity today versus demand logged by corporate FX users.
While traders reported increased inflows from exporters, and non-bank corporates, foreign portfolio inflows has remained tight. By market consensus, the naira stability will extend over the short term as the CBN keeps US dollar flowing through the official window.
Amidst oil prices fluctuation, Nigeria’s gross external reserves increased to $41.624 billion on Wednesday. The authority has not conducted an open market operation to mop up excess liquidity in the financial system.
Oil prices continue to fluctuate, and both Brent and US WTI are still trading below $67 per barrel. The market faces supply concerns and lower demand due to threat to sanction Russia while US inventories and production surge.
Despite inflation surge, the market continues to expect a more accommodative Federal Reserve, keeping sentiment constructive after weeks of pressure on crude.
Meanwhile, Russian oil supply is pivoting towards Asia and OPEC+, while the U.S. boosts production, driving significant market readjustments. # Naira Drops as US Dollar Demand Surpasses FX Supply
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