High Dollar Demand Weakens Nigerian Naira, Spot Rate Falls
A significant surge in US dollar demand at the Nigerian foreign exchange market (NFEM) led to a sharp decline in the naira’s value on Monday, according to daily FX data published by the Central Bank.
The Apex Bank FX update showed that the local currency depreciated sharply by 2.55% (₦34.48) against the U.S. Dollar, amid a drive toward safer assets amid the Middle East war.
FX analysts said the pressure stemmed from sustained dollar demand, which outweighed available supply at the opening, though some recovery emerged toward the session close.
Citing FX data published by the CBN, AIICO Capital Limited reported that the Naira traded in a wider range before settling at ₦1,388.38/$. The official rate hovered between N1380 and N1399, with no FX intervention to support sales.
Elsewhere, Nigeria’s gross external reserves dropped to $49.79 billion, reflecting a marginal drawdown of $43.61 million from the previous day’s level, but still up by 9.42% year-to-date.
Foreign reserves dip despite expectations that Nigeria will benefit from higher global crude oil prices. Late on Monday, crude oil prices eased after the U.S. signalled that it would hold talks with Iran over the Strait of Hormuz.
Oil prices dipped by nearly 10% on Monday as markets priced in the worst-case supply disruption following the global de-escalation signal.
This followed the U.S postponement of planned strikes on Iran’s energy infrastructure. Brent crude fell by a significant 7.02% or $7.47, hovering around $98.94 per barrel, while U.S. West Texas Intermediate (WTI) lost 10.41% to around $88.00 per barrel.
Similarly, acute volatility in gold prices is set to persist in the short term as investors cut risk, with the Iran war boosting inflation fears, curbing bets on interest rate cuts, and weighing on global growth, analysts said.
Spot gold price lost 8.47%, to around $4,410.77/oz, while U.S. gold futures dipped by 9.99%, hovering around $4,440.09/oz. Analysts at AIICO Capital Limited expect oil to trade at lower levels as global tensions ease amid talks. Analysts expect sustained downward pressure on gold as global risk-off sentiment resurfaces. Money Market Rates Mixed, Banks SDF Bets Rise to N8.2trn
