Naira Crosses New Red Line at Investors, Exporters Window

Naira Crosses New Red Line at Investors, Exporters Window

The Nigerian local currency, the Naira, has crossed the new red line at the Investors’ and Exporters’ Foreign Exchange (FX) window on the back of sustained demand pressures across the markets.

The exchange rate at the Investors and Exporters FX window established in 2017 to ease pressures for manufacturers and other investors have moved upward from as low as N415 per dollar in the year to a new level at N440 per dollar.

Most analysts note sampled by MarketForces Africa think the local currency needs to be devalued due to its overvaluation. But then, lower market supply has been dealing negatively with the said overvaluation at the investors’ official window.

At the parallel market on Tuesday, currency traders exchanged the local currency at N740 for a United States dollar as pre-election demand worsened the exchange rate.

The Naira on Tuesday exchanged at N441.17 to the dollar at the Investors and Exporters window, a depreciation of 0.46 per cent when compared with N439.17 to the dollar at the close of business on Oct. 7.

The open indicative rate closed at N439.40 to the dollar on Tuesday. An exchange rate of N414 to the dollar was the highest rate recorded within the day’s trading before it settled at N441.17.

The Naira sold for as low as N414 to the dollar within the day’s trading. A total of 73.66 million dollars was traded at the official Investors and Exporters window on Tuesday.

Coronation Research said in a note that the Nigerian Autonomous Foreign Exchange fixing (NAFEX) rate traded within the range of N422-N460 last week but closed at N439.2 to a dollar on Friday.

This means the local currency lost N2.1 last week. In the forwards market, the exchange rate traded within the range of N442-N454.4 per greenback. READ: Nigerian Bourse Closed in Red as Inflation Worsens

In the 1-month contract, FX appreciated by +0.2% to close at N445.9 and in the 3-month contract, FX appreciated by +0.2%  to close at N452.0 as of Friday’s close.

In the retail secondary market intervention sales (SMIS) market, the FX spot rate remained unchanged week on week to close at N430 on Friday.

“… We note that in the parallel market, the Naira closed at an average of N730. Therefore, the gap between the NAFEX and parallel market rate is 66.2%”, Coronation Research stated in a market note. Data from the FMDQ platform showed that NAFEX turnover increased by 117% or $53.8 million week on week to $99.7 million on Friday.

Analysts said the NAFEX window recorded an inflow of $211 million with the Central Bank of Nigeria (CBN) accounting for 2.8%, foreign portfolios investors (FPIs) accounting for 8.9%, non-bank corporates accounting for 37.6%, exporters accounting for 40.9% and others accounting for 9.8%.

Citing data from the CBN website, MarketForces Africa reported that Nigeria’s external reserves declined by $153.6 million week on week to $38.1 billion. Read: CBN Devalues Naira 12.95% despite Rising Foreign Reserves

# Naira Crosses New Red Line at Investors, Exporters Window#

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