Exchange Rates Unified as Naira Sees Small Gain

Exchange Rates Unified as Naira Sees Small Gain

Exchange rates converged around N1603 per US dollar at official and parallel markets. The volume of US dollars requested for import matched the forex supply at the official market. 

Traders said the naira rally has been supported by an improvement in the US dollar supply, supported by latest FX inflows into the market. Using policy measures, the apex bank intensified efforts to reduce speculation on the local currency. On Tuesday, the naira converged for the first time in March, 2024.

Since last week, FX rates have been hovering at an average of N1600 and analysts are expressing a view that forex volume available at the official window will determine the next price action, exchange rate direction.

MarketForces Africa reported that Goldman Sachs has predicted that the naira will appreciate to N1200 within 12 months. Also, Financial Derivative Company estimate pegged naira’s true value at N910.10.

The apex bank claimed that the local currency is grossly undervalued but exchange rate movement continues to discount the assertion. “There is a limit to naira upside despite large devaluation following recent adjustment made by FMDQ FX pricing methodology”, an investment expert said.

Based on Nigeri’as exchange rate movement in the past, the naira has been recouping loss slowly. Each negative twist on the exchange rate (spurred by an increase in the US dollar) has been heavy– causing as much as 5% daily FX depreciation.

According to data obtained from FMDQ platform, the naira appreciated by 0.90% to close at ₦1,603.38 per US dollar at the Nigerian autonomous forex market.  In the parallel market, the Naira closed at ₦1,603 to the US dollar.

 FX rate has been relatively stable in the open market since the Central Bank of Nigeria (CBN) withdrew more than 4170 Bureau de Change operators’ licenses. The naira is expected to claw back losses triggered by previous policy gaps in the system. Following CBN’s recent directive, International Money Transfer operators (IMTOs) can no longer facilitate outbound money transfers to other countries.

The CBN guideline provides that all inbound money transfers to Nigeria will be paid only in naira through a bank account or in cash at the prevailing rate in the FX market. This is expected to have positive impacts on the exchange rate direction.

In a review, Cardinalstone Partners Limited said over the last 10 years, Nigeria has received about $100.0 billion annually in inflows. Meanhile, about 38.0% of the amount passed through the official channels.

“We believe that if the official exchange rate – almost at par with the parallel market rate- is allowed to reflect demand-supply dynamics, there will be less incentive to keep dollar inflows away from official channels”, the multi-asset investment banking firm said in its note.

Analysts believe this will likely sustain the improvement in FX liquidity at the official channels.  In the global commodity market, oil rallied. Brent crude rose by 0.41% to $82.55 per barrel, while WTI crude also increased by 0.47% to $78.30 per barrel. #Exchange Rates Unified as Naira Sees Small Gain Anti-Homosexuality: Uganda Faces Difficulties Accessing External Funding –Fitch