Naira Begins to Reclaim Losses in FX Market after Auctions
The naira cleared at N1,601 per US dollar in the Nigerian autonomous foreign exchange market on Tuesday as the local currency began to reclaimed losses.
Exchange rate improved for the two consecutive days in the week after the Central Bank of Nigeria’s (CBN) FX auction sold to authorized dealer banks to boost liquidity.
FX liquidity challenge has been a downside to Nigeria’s naira’s ability to reclaimed value. In July, the Naira weakened compared to foreign currencies due to increased demand, partly due to seasonal effects, AIICO Capital Limited said in a report.
Analysts said although the exchange rate was less volatile, the Naira still weakened despite efforts by the Central Bank of Nigeria (CBN) to intervene in the market, particularly towards the end of the month.
The CBN initially sold $122.67 million and $106.5 million to Authorized Dealer Banks, followed by an additional supply of over $120 million at the end of the month to ease demand pressures.
On Tuesday, the naira appreciated by 0.38%, closing at ₦1,601.00 per US dollar. At the current exchange rate, the gap between official and parallel market rate has narrowed to N25 on each US dollar.
According to channel checks, the naira closed at ₦1,575 per US dollar, gaining N10 over the last two days. Demand for the US dollar at the informal currency market remains elevated, but economic activities have been affected by the ongoing protests.
Elsewhere, Nigeria’s gross external reserves rose to $36.86 billion, hitting 18-month high as inflows from various sources continue to boost the amount.
In the global commodity market, Brent crude increased by 0.53% to $76.71 per barrel, and West Texas Intermediate (WTI) crude rose by 0.72% to $73.47 per barrel on Tuesday.
“We anticipate a slight depreciation in August. This is due to recent decisions made by the CBN regarding the sale of foreign currencies to meet ongoing demand and seasonal fluctuations.
“While the $500 million loan from the African Development Bank is expected to support the market, we anticipate a slight impact from this development”, AIICO Capital Limited said in a report. #Naira Begins to Reclaim Losses in FX Market after Auctions
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