Naira Begins Fresh Price Discovery over Huge FX Boost
The Nigerian naira extended gain in the foreign exchange market on Wednesday over huge FX liquidity boost that reduced demand pressure.
The naira began the process to recover losses after the monetary authority begin to auction FX at lower spot rate at the official window.
FX liquidity has remained key challenge in the price discovery process amidst claims that the local currency is grossly undervalued.
According to data from the FMDQ platform where daily FX spot rate is quoted, the naira strengthened against the US dollar by 0.28% to close at ₦1,596.52 per US dollar.
This gained was supported by favourable market disposition to huge FX sold to authorised dealer banks in at the Central Bank of Nigeria’s (CBN) retail Dutch Auction. The authority reintroduced the Retail Dutch Auction System in a bid to address the rising unmet foreign exchange demand.
The apex bank sold more than $876 million to FX users at the auction conducted on Wednesday following previous notice to authorised dealers and market participant in a bid to boost FX liquidity.
The auction results showed that a total bid valued at US$1.18 billion was received from 32 authorized dealers banks, of which, bids valued at US$876.26 million from 26 banks qualified, while bids valued at US$313.69 million from 6 (six) banks were disqualified.
According to data from FMDQ, total turnover declined by -14.3% or US$191 million, to close at USD1.1 billion on Friday at the Nigerian autonomous FX market last week. In the week, the official window recorded an inflow of USD591 million.
The foreign portfolio investors (FPIs) accounted for 7.9% of the sum, while the CBN contributed 21.7%, non-bank corporates was the major driver of the US dollar volume at 44.8%, exporters did 21.9%, and others accounted for 3.7%.
Exchange rate closed at ₦1,590 per US dollar in the parallel market, down by N10 over the previous day’s rate in the parallel market as invisible FX demand grew above total supply.
In the global commodity market, crude oil price appreciated today, amidst the risk of a major escalation in the Middle East. Brent prices increased by 2.77% to $78.60, while WTI prices accelerated by 3.19% to $75.31. Gold prices increased by 0.18% to $2,435.80 per ounce. #Naira Begins Fresh Price Discovery over Huge FX Boost
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