Naira: $250m FX Injections Redirect Exchange Rate
The naira appreciated by 0.2% against the US dollar at the Nigerian foreign exchange market as rounds of FX injections boosted liquidity.
The exchange rate slightly reversed the downward trend, gaining 20 basis points on the day at the official window. The local currency fluctuated negatively at the official window last week.
The exchange rate weakened even with the Central Bank intervention sales to authorised dealers and local banks. The CBN injected $250 million to buy the naira amidst rising demand for the greenback, driven by a series of foreign payment requests from companies with external deals.
Update from the CBN on Monday revealed that the naira strengthened by 0.20% to close at N,453.84/$. The currency’s softness underscores persistent demand pressures and the structural inefficiencies that continue to weigh on price discovery across Nigeria’s FX ecosystem, Cowry Asset Limited said in a note.
The spot FX rate touched an intraday high of N1462.5000, suggesting the pressures only moderated versus the previous trading session when the quote was N1462. Trading data revealed that the spot rate hit an intraday low of N1451, with the average rate eventually closing at N1453, according to CBN FX data.
The FX market is likely to maintain a cautious but steady posture, moving in line with the strength and consistency of inflows rather than speculative behaviour, analysts said.
In a note, Cowry Asset Limited maintained that market conditions suggest that pricing is being shaped by lighter supply rather than any fundamental shift in sentiment, meaning the naira may continue to face bouts of pressure unless inflows improve meaningfully.
In the parallel market, the naira appreciated to N1455 per dollar from N1460 amidst year-end inflows. Naira is projected to remain stable at the official window, though intermittent fluctuations signal FX supply pressures amidst robust gross external reserves.
Nigeria’s foreign reserves settle higher at $44.261 billion, covering more than 10 months of imports based on current data. However, the gradual build-up in external reserves and sustained CBN interventions should provide a measure of stability, helping to temper volatility even as structural demand-supply gaps persist. GTCO Slides Amidst Multiple Block Transactions
