Naira Depreciates Ahead of 2-Week Automated FX Trading Trial
The naira depreciated against the US dollar in the official exchange rate market over a liquidity shortage. The volume of US dollar demand was a bit more than FX liquidity on the supply side. Spot rates have worsened across the black and Nigerian autonomous foreign exchange markets due to a slowdown in FX intervention sales.
FX spot data from the FMDQ platform showed that the naira depreciated by 0.29%, closing at N1,650.20 per US dollar at the official market. FX traders are expecting the Central Bank of Nigeria (CBN) to release further details on the exchange rate automation platform as November races to an end.
The CBN recently announced a decision or plan to introduce the Electronic Foreign Exchange Matching System (EFEMS) for the Nigerian Foreign Exchange Market (NAFEM). According to analysts, the platform will provide authorized dealers with a centralized platform to conduct all interbank FX transactions.
In partnership with the Financial Markets Dealers Association of Nigeria (FMDA), the CBN will also publish trading rules along with real-time buy and sell order data from EFEMS. The authority said a two-week trial is set for November, with full implementation planned for December 1, 2024.
Some analysts also attribute the reduction in FX sales to banks in October as part of the CBN preparation to switch gears to automation – with the first trial in November. In the parallel market, the naira closed at ₦1,730 to the US dollar as demand for foreign currency climbed. A slew of analysts projected that seasonal demand for foreign currency would cause spot rate adjustments at official and parallel markets.
However, there is a view that weak economic conditions will affect households buying power during the yuletide and the possibility of low imports not far fetch. On Thursday, global oil prices rose in the commodity market, with Brent Crude climbing 1.20% to $73.1 per barrel and West Texas Intermediate (WTI) gaining 1.32% to reach $69.3 per barrel. #Naira Depreciates Ahead of 2-Week Automated FX Trading Trial
