Naira Depreciates for 3-Day over Rising FX Demand
For three days straight, the Nigerian naira has been losing its buying power amidst the foreign currency crisis facing the country. Pressures across the FX market worsened midweek despite the expected $3 billion loan from the African Import-Export Bank.
The euphoria of the Central Bank of Nigeria’s (CBN) decision to bring back Bureau de Change (BDC) operators into the FX management chain appears to have also fizzled out amidst the weak supply side.
Nigeria returned to the drawing board as the politically influenced decision of the monetary authority had gone wrong. The FX gap between exchange rates across the market has widened, putting the nation at the most disadvantageous end amidst the struggle to reflate private sector performance.
“Devaluation was done wrongly –There was no critical analysis of the apex bank decision to float the naira, the need to settle FX backlog and total analysis of what could go wrong in between.
“Nigerians don’t benefit from naira devaluation – if they do, the authority should come out and explain how the recent decision positively affected the citizen – for me, it was not well thought through. It is a continuation of colonial mentality that we should reduce the value of our local currency against the dominant US dollar”.
In their separate results, consumer goods, and telecom companies reported large losses due to fluctuation in exchange rates. At the investors and exporters FX window on Wednesday, the Naira weakened against the US dollar at the Investors and Exporters (I&E) windows, trading at N773.43 from N770.72 on Tuesday.
The open indicative rate closed at N781.49 to the dollar on Wednesday. A spot exchange rate of N799.90 to the dollar was the highest rate recorded within the day’s trading before it settled at N773.42. The naira sold for as low as N738 to the dollar within the day’s trading. A total of 169.07 million dollars was traded at the investors and exporters window on Wednesday
Conversely, the parallel remained unchanged, with the Naira closing at N900 while hope for fx accretion into external reserves fell. The oil market has switched into bearish mode as Iran floods the global market with crude.
Brent crude fell 1.03% to $83.17 per barrel, while WTI crude lost 0.96% to $78.88 per barrel. Oil futures were lower, fueled by disappointing PMI data as the S&P flash Global Composite PMI contracted to 50.4 (from 52), while the US Manufacturing PMI dropped to 47 (from 49).
Elsewhere, gold was trading near $1,915 per ounce (+0.93%), supported by improved demand for bullion amid lacklustre PMI data, which pushed US treasury yields downwards.#Naira Depreciates for 3-Day over Rising FX Demand Naira Gains 10% in Parallel Market, I&E Rate Settles at N739.52