Naira Breaches N1500 Threshold over ‘Slim’ US Dollar Supply
The naira exchange rate has breached N1500 and declined to N1503 at the official market today despite an unexpected decision of the Central Bank of Nigeria (CBN) to inject foreign currency into the autonomous FX market.
In the parallel market, the Naira closed at N1,525 against the US dollar, according to a channel check. The apex bank had halted FX market intervention sales for 18 weeks and publicly announced that the exchange rate would be determined under the willing buyers and willing sellers’ model.
The decision to float the local currency at the time of sharp and sustained US dollar shortage has plunged the naira into a big mess, losing value across FX market each day. FMDQ data showed that the naira depreciated by 0.3% to N1,503.38 midweek at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
After staying away from the official window for about 5 months, the CBN sold forex worth $86 million yesterday to support the local currency from falling above N1500 range. Shell Trims Outlook for LNG Demand Growth
Last week, data from FMDQ showed that the volume of US dollars transacted increased by +86.1% or +USD1.1 billion to USD2.4 billion Friday on Friday In its market note, Coronation Research said its analysts understand that the sharp increase was partly due to the deadline targeted at reducing net open position exposures of banks.
Meanwhile, the NAFEM window recorded an inflow of USD41.8 million while there were no injections made by the CBN for the 18th consecutive week. On the supply side, foreign portfolio investors (FPIs) accounted for 37.9% of FX inflows, non-bank corporates accounted for 29.8% exporters accounted for 30.7%, and others accounted for 1.6%.
At the core of Nigeria’s currency conundrum is an external imbalance problem that underpins an FX illiquidity challenge. This has been exacerbated by the distortionary impact of hoarding, stockpiling, and panic buying, Agusto Ratings said in a note. #Naira Breaches N1500 Threshold over ‘Slim’ US Dollar Supply
