Naira Crash Makes FX Rate in Parallel Market Cheaper
It has become cheaper to trade foreign currency in the parallel market than the official window as the Nigerian naira crashes to N1482.57 at the autonomous FX market. In other words, FX users would pay more to obtain US dollars at the official window than at the black market
The latest depreciation of the local currency followed the Central Bank of Nigeria (CBN) decision to allow forces of demand and supply to set exchange rates in an import-dependent economy. For four months, the apex bank has stopped foreign currency injections into the FX market despite a sustained decline in US dollar supply by foreign investors.
The forex market recorded Naira’s largest daily devaluation in history on Monday, falling by more than 51% as forex demand continues to outpace the US dollar available to meet import requests.
Data from the FMDQ platform showed that the Naira weakened against the greenback, trading at N1,482.57 per dollar at the official market. Similarly, In the parallel market, the Naira depreciated further by 1.39% to close at N1,460 to the US dollar.
The Nigeria Autonomous Foreign Exchange Market (NAFEM) rate traded within the range of N467.0 – N1,421.0 per US dollar but closed at N891.90 on Friday, currency traders said in a note. In the forwards market, forex traded within the range of N941.4 – N1,220, according to Broadstreet analysts’ reports reviewed by MarketForces Africa.
In a note, Coronation Research noted that in the parallel market, the Naira closed at an average of N1,425 on Friday. As a result, the gap between the NAFEM and the parallel market rate settled at 59.8%. According to data from FMDQ, NAFEM turnover declined by -20.7% or -USD117.9 million to USD451.4 million on Friday. The NAFEM window recorded an inflow of USD26.88 million, according to Coronation Research.
Analysts noted that there were no injections made by the CBN for the 16th consecutive week. However, foreign portfolio investors (FPIs) accounted for 5.7%, non-bank corporates accounted for 38.71%, exporters accounted for 38.06%, and others accounted for 17.5%.
In the global commodity market, the price of crude oil experienced an increase, with Brent crude rising by 0.04% to trade at $81.86 per barrel on Tuesday. Also, the West Texas Intermediate (WTI) crude oil increased by 0.42% to trade at $77.10 per barrel. #Naira Crash Makes FX Rate in Parallel Market Cheaper