Naira Declines on Sustain Forex Scarcity
Naira traded weak Thursday after a sustained imbalance between the demand and supply of foreign currencies in the official and parallel markets. Data from the Central Bank of Nigeria (CBN) shows gross external reserves at $35.2 billion, with expected outflow for weekly FX auction sales to authorised dealers.
The local currency upheaval is dragging and FX reform isn’t in the loop in the short term, traders told MarketForces Africa in a chat, saying Nigeria’s new government could try its hands at the wheel.
At the Investors, Exporters FX window, the naira weakened against the greenback, trading lower at N463.67 spurred by increasing bids. Yesterday’s spot rate was N463.33.
The open indicative rate closed at N463.85 to the dollar on Thursday. An exchange rate of N467 to the dollar was the highest rate recorded within Thursday’s trading before it settled at N463.67.
The naira sold for as low as 460 to the dollar within the day’s trading. On Thursday, a total of 157.56 million dollars was traded at the official Investors and Exporters window.
Similarly, the parallel market depreciated by 0.09% to N770 from N763 as demand for Invisibles began to filter into the open space after a 50% reduction in foreign currency allowance to local FX users for business and personal needs.
With Dangote Refinery’s output coming to the market in the second half, some FX analysts told MarketForces Africa that the outlook for the naira will improve – albeit not significantly- in the short term.
The refinery that becomes operational this week will help Nigeria reduces FX spending associated with oil and gas imports. This will boost external reserves and strengthen the local currency.
Despite being heavily dependent on foreign goods and services, Nigeria continues to face foreign currency scarcity. Forex illiquidity pressures have been a downside to naira stability, losing 10% in the financial year 2022.
The challenge of capital flight is a key concern for monetary authority.
Analysts said the elevated interest rates by global central banks have continued to reinforce flight to safety as foreign portfolio investors shed their investment portfolio in emerging markets and developing economies in favour of safer haven advanced economies.
Market analysts think foreign exchange stability and liquidity concerns will continue to weigh on foreign portfolio inflows. #Naira Declines on Sustain Forex Scarcity >>>Naira Steadies as Banks Issue Update on FX Purchase
