Exchange Rates Gap Increases as Naira Diverges in FX Markets
The exchange rates gap between official and unofficial currency markets widened to N23 per greenback, according to channel check. Updated FX data from the Central Bank of Nigeria (CBN) showed that the naira appreciated week on week to close at N1457 per dollar, from N1475.
The official market remained largely stable, supported by steady foreign portfolio investors (FPI) inflows and ample system liquidity.
The naira gained N18 on the dollar, supported by limited FX intervention, while rising external reserves reinforce overall market stability. In the forwards market, the naira rates appreciated across contracts, boosted positive year end projections.
Investment firm Cordros Capital Limited said in a note that FX forward for 1-month contract rose by +0.7% to NGN1,491.57/USD, 3-month contract appreciated by +0.7% to NGN1,541.95/USD.
Also, FX forward contract for 6-month climbed by +1.0% to NGN1,613.89/USD and 1-year gained +1.5% to NGN1,753.43/USD) contracts. In the parallel market, the local currency weakened marginally to N1,480, reflecting persistent FX demand pressures.
Meanwhile, Nigeria’s external reserves recorded a mild uptick, rising 0.40% week-on-week to $42.87 billion from $42.70 billion the previous week.
The improvement was supported by steady oil receipts, stronger non-oil inflows, and a sustained trade surplus, all of which continued to underpin the CBN’s FX stability efforts.
Crude oil extended gains this week, with Brent oil rising 8.00% to USD 66.13 per barrel, while US WTI advanced 7.20% week on week to USD 61.75.
The rebound was driven by expectations of tighter supply as OPEC+ maintained its production cuts and tensions in the Middle East raised concerns about possible disruptions.
In addition, U.S. crude inventories declined slightly, and refinery margins improved, boosting market confidence and helping offset worries about weak global demand.
Recent U.S. sanctions on Rosneft and Lukoil prompted Chinese and Indian buyers to temporarily suspend new orders. However, markets anticipate only a limited long-term impact on global oil supply and demand.
“… rising non-oil exports and improving market confidence should underpin inflows, while externally, healthy FX reserves, a positive current account position, and a shift toward global monetary easing are expected to reinforce foreign investor sentiment and stimulate additional FX market inflows,” Cordros Capital Limited said.
Analysts at Cowry Asset Limited expect the naira to experience mild pressure in the near term as FX demand persists amid limited liquidity in the market. However, steady oil receipts and a gradual build-up in external reserves could offer some support to the local currency.
“We continue to monitor CBN interventions and global oil price movements, which are likely to shape sentiment and exchange rate direction in the coming week.” CBN to Auction N570 billion Worth of Nigerian Treasury Bills
