Naira Declines Despite All Weeks FX Interventions
The Nigerian naira experienced pressure on its exchange rate per US dollar as foreign currency challenges persisted. The Nigerian Foreign Exchange Market (NFEM) faced significant demand pressure throughout the week, despite the Central Bank of Nigeria’s (CBN) interventions.
Early in the week, the naira depreciated due to high demand, closing at $/₦1,528.03 and later at $/₦1,532.93. Midweek, CBN’s dollar sales of $38.65 million helped stabilise the Naira, leading to a slight appreciation to $/₦1,530.52.
Further interventions totalling $92.1 million provided additional support, keeping the naira relatively stable at $/₦1,530.62. However, by week’s end, the naira depreciated by 1.249% week on week, closing at $/₦1,536.89, with trades ranging between $/₦1,535 and $/₦1,540.
In total, the CBN sold $230.85 million to authorised dealers to help manage sustained exchange rate volatility. Meanwhile, gross FX reserves decreased this week by $2.65 million w/w to USD 38.36 billion.
This week, FX forward contracts were mixed. The naira rates increased across the 1-month fx forward contract +0.1% to N1,5780.82 to US dollar. The 3-month fx forward contract rose by +0.1% to N1,655.95.
Meanwhile, the 6-month FX forward contract dipped by -0.2% to N1,768.61, and the 1-year contract fell by -1.1% to NGN1,989.81 per US dollar. While market demand pressures have eased, near-term risks to naira volatility persist, Cordros Capital Limited told investors in an emailed note on Friday.
Analysts noted that foreign portfolio investment (FPI) participation in the FX market remains subdued, partly due to concerns over oil receipts amid lower oil prices.
Additionally, the potential for a surge in market demand looms, driven by the Dangote Refinery’s shift to selling petroleum products in U.S. dollars instead of naira following the expiration of the crude-for-naira deal. Google to Acquire Cloud Security Platform Wiz for $32bn
