Exchange Rates Near Convergence, FX Gap Narrows to N10
The Nigerian naira rapid fallen has moved exchange rates closer with the gap between official and parallel market rates settling at N10, according to FX market data. Despite efforts to ensure the local currency gained strength, exchange rates worsened at both official and parallel markets.
The pressures on the local currency remain scarcity of foreign currency in the economy while demand side continues to rise. Most companies in Nigeria depend on foreign inputs apart from other invisible FX transactions by individuals.
All efforts to keep the naira in better shape have not yielded positive results since the largest devaluation that started last year. The apex bank directives which include banks’ net open position reduction and 50% cap on the international oil companies’ remittance are not enough to reduce FX illiquidity in the forex market.
The trend has forced the CBN to return to the autonomous forex market to sell US dollars to authorised dealers. The CBN also launched $20,000 FX sales for Bureau de Change operators to ensure the gap between official and unofficial rates moderated.
Data obtained from the FMDQ platform where rates are quoted showed that the naira depreciated by 0.21% to close at ₦1,605.74 per dollar in the official market. In the parallel market, the Naira closed at N1,595 against the US dollar as renewed demand pressure has started to reverse previous rally on the local currency.
According to data from FMDQ, turnover increased by +32.0% US$300.6 billion week on week to USD1.2 trillion at the Nigerian Autonomous foreign exchange market on Friday. Nigeria Bonds, Treasury Bills Yields Collide at 17.2%
Meanwhile, the NAFEM window recorded an inflow of US$555 million. The CBN accounted for 46.9% of the forex supply, followed by foreign portfolio investors 5.5% contribution. Non-bank corporates accounted for 25.0%, exporters accounted for 20.8%, and others accounted for 1.8, Coronation Research said in a review.
External reserves track below $34 billion following a boost from increasing oil prices despite uncertainties in the global commodities market. Yesterday Brent crude increased by 1.13% to close at $82.97 per barrel. Similarly, WTI crude advanced by 1.68% to $79.47 per barrel.
