Naira Appreciates as FX Demand Pressures Reduce
The Nigerian naira appreciates against the United States (US) dollar and other major currencies as demand pressure subsided, according to trading data. A similar scenario was spotted in the parallel market amidst election spending and late-year import demand by economic agents.
At the investors’ and exporters’ foreign exchange market, the exchange rate settled at N445.33 from N446.33 despite moderation in the foreign currency supply, data from FMDQ Exchange tracked show.
Meanwhile, FX spot rates differ across alternative channels. Bureau de Change operators sold dollars between N745 to N750 as of Friday’s close. Meanwhile, rates were around N780 at the beginning of the week.
Nigerian banks sold dollars for end users for online channel payments between N490 and N499 as of Friday, according to checks conducted by MarketForces Africa with the top five banks via debit cards. READ: Fixed Income Yields Mixed as Naira Weakened
At the official FX market, there was a noticeable decline in foreign currency supply up till Thursday. Cordros Capital reported that at the Investors and Exporters FX window, total turnover fell by 14.8% to US$460.25 million, with trades consummated within the NGN410.00 – 444.00/USD band.
Analysts at the investment said they expect the FX liquidity issues to remain over the short-to-medium term in the absence of any positive signal that denotes an improvement in foreign currency supply relative to the pre-pandemic levels.
Cowry Asset Management said, “We saw the Naira experience another calm in demand in the foreign exchange market as Bureau De Change (BDCs) operators cut rates in a bid to attract users of the greenback just as we inch closer to the official date of the release of the redesigned Naira notes by the CBN”.
Consequently, at the open parallel market FX window, the Naira strengthened further by N28 or 3.6% week on week to close the week at N747 from N775 in the previous week’s close. At the interbank foreign exchange forward contracts market, the spot exchange rate remained unchained from the previous week as it closed the week at N445 from last week.
In the forwards market, the rate weakened by 1.8% for a 1-month contract to N460.03; a 3-month contract lost 2.7% to N471.58 per United States dollar. Similarly, 6-Month contracts contrast by 3.1% to N491.30 and 1-year contracts dropped by 4.3% to N473.02.
For thirteen weeks straight, Nigeria’s gross external reserve recorded another decline, weeks, falling by USD59.56 million last week to USD37.11 billion, according to data from the Central Bank of Nigeria. #Naira Appreciates as FX Demand Pressures Reduce
