Naira Declines, Analysts Anticipate Robust Foreign Reserves
The Nigerian local currency, the naira, dipped versus the U.S. dollar at the official foreign exchange (FX) window on Wednesday after $52 million intervention sales by the Central Bank.
The spot rate fluctuating trend suggest the forex market witnessed higher US dollar demand at the official window, and the Central Bank of Nigeria (CBN) intervention helped taming share exchange rate volatile.
Analysts said market participants at the official market rely on dollar supply from the CBN to meet certain eligible demand. In the absence of open market operation to attract foreign investment inflows, FX liquidity appears to have been stressed due to limited receipt through exporters.
Latest spot FX data from the CBN revealed that naira fell against the dollar, with a 0.08% depreciation to ₦1,488.56 per US dollar, reflecting increased demand.
To confirm this, the CBN reported that intraday rate peaked at N1,498 per greenback midweek, depreciated from previous day high of N1,495.
Meanwhile, intraday FX spot rate hit the lowest of N1,481 versus N1,482.5500 the previous, explaining the shortfall in the US dollar volume at the official window.
Similarly, the naira depreciated at the parallel market to close at an average of ₦1,518 per dollar, according to channel check. In a note, TrustBanc analysts expect external reserves to reach $45 billion by year-end if oil inflows, remittances, and borrowings hold.
The investment firm reported that Nigeria’s reserves hit $42.14 billion, the highest in six years, up from July’s $37.18 billion low. It said reserves are up 13% since July, boosting confidence in FX stability and debt cover.
The external reserves momentum hinges on oil output, policy clarity, and steady investor flows, the firm said. In the global commodity market, oil prices fluctuated negatively amidst uncertainties.
Oil prices climbed about one per cent to a three-week high as a surprise drop in U.S. weekly crude inventories boosted the demand outlook amidst export issues in Iraq, Venezuela and Russia.
Brent futures rose 94 cents, or 1.4%, to $68.57 a barrel, while U.S. West Texas Intermediate crude futures (WTI) rose 97 cents, or 1.5%, to $64.38. Dangote Cement Declines to N8.71 Trillion on NGX
