Naira Depreciates as FX Turnover Slumps by 59%

Naira Depreciates as FX Turnover Slumps by 59%

The Nigerian naira depreciated to N774 per United States (US) dollar on Monday as about $165 million in foreign exchange (FX) turnover at the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) market slumped as foreign currency shortage persists in the market.

The supply side has remained weak despite the devaluation of the local currency in June. Experts said ongoing pressure against the local currency across the market was unanticipated due to the reactive approach to currency management in the country. In the parallel market, the naira also declined over tight supply and rising demand by FX users.

At the Investors and Exporters FX window, the Naira exchange rate worsened to N773.98 from N756.91 due to the FX shortage in the economy. However, at the parallel market, the exchange rate depreciated by 0.52 to N960. 

Naira woes at the parallel market deteriorated over the week with the exchange rate testing fresh lows at N960/$ with market feelers linking the development to demand from Nigerians planning to make school fees payments and travel expenses.

Analysts said strong growth in the demand for non-tradable services in the last decade has been the main driver of FX’s weakness. Last week, the NAFEX rate traded within the range of N720-N807.2 per US dollar but closed at N756.91, according to currency traders.

In its market report, Coronation Research said this points towards a depreciation of -2.8% or N20.3 over the week. In the forwards market, the naira traded within the range of N799.86-N910. Analysts noted the gap between the NAFEX and the parallel market rate closed the week at 26.2%. 

According to data from FMDQ, NAFEX turnover decreased by 59% or USD164.9 million to USD280.6 million on Friday as weak external reserves kept the Central Bank of Nigeria (CBN) supply under check.

Nigeria’s external reserves decreased to USD33.3 billion as inflow from crude oil export remains underwhelming. Brent crude rose 1.01% to $94.88 per barrel, while WTI crude gathered more gains by 1.13% to $91.80 per barrel in the face of expectations for a tighter market and hopes of a revitalized China economy from stimulus measures. 

Oil future edged higher on Monday and was driven by expectations for tighter supply in the final months of the year. #Naira Depreciates as FX Turnover Slumps by 59% Naira Devaluation Deepens Economic Crisis in Nigeria

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