FX Watch: CBN, Dangote Export Flows Unleash Naira’s Potential
The naira has started to claw back value against the dominant US dollar at the official window. The local currency broke the psychological barrier this week and stayed strong thereafter.
A channel check conducted by MarketForces Africa for FX sales to local banks showed some tier-1 banks priced the naira for buy at N1468 per dollar. At the official window, the naira closed the day at N1484 per dollar.
For what it worth, the CBN has done a good job with positive investors’ sentiment. Dangote Refinery exports flows have also helped significantly.
The refinery has exported 1.1 billion liters of refined crude oil between June and September, helping export flows and reducing demand for FX for imported fuel amidst unresolved issues with local importers.
The pressures in the official window reduced sharply since last week, when more than $38 million in FX sales to banks strengthened the supply side. MarketForces Africa asked for fx traders in banks about what is possible from here. The naira is noted to have the potential to gain more value given rising external reserves.
At the official window, the naira extended its gains, supported by robust dollar liquidity and modest FX demand in the interbank NFEM. The local currency traded between ₦1,479.50 and ₦1,490.00, appreciating 89 bps to close at ₦1,484.1395 as per AIICO Capital Limited.
With $41.844 billion gross external reserves, fx traders said the Naira is expected to maintain its current trading range in the near term. In the absence of significant FX demand, an official rate of N1450 per dollar is possible in September – if the CBN maintains support.
Elsewhere, oil prices climbed on Tuesday as traders considered the risk of further supply disruptions from Ukrainian drone strikes on Russian ports and refineries, while also awaiting the Federal Reserve’s rate decision.
Brent crude rose $1.01, or 1.5%, to $68.45 a barrel, and U.S. WTI gained $1.21, or 1.9%, to $64.51.Meanwhile, gold soared past $3,700 an ounce for the first time, driven by expectations of a Fed rate cut, strong safe-haven demand, central bank buying, and a weaker dollar.
Spot gold touched a record $3,702.95 before easing to $3,690.59, while U.S. December futures added 0.2% to $3,727.50. Attacks on Russian refineries may boost U.S. diesel demand and extend the inverted curve.
Markets also await a likely Fed rate cut on Sept 16–17 to spur growth, though economic concerns linger. U.S. crude stocks are expected to fall.#FX Watch: CBN, Dangote Export Flows Unleash Naira’s Potential
