Naira Depreciates to N1,456 as FX Demand Eclipses Supply
The naira’s official exchange rate fell to N1456 per dollar due to FX shortage in the Nigerian Foreign Exchange Market (NFEM). The currency market transactions were conducted amidst US dollar shortfall amidst rising international payments.
This happened due to thin US dollar inflows from exporters, non-bank corporate, foreign portfolio investors and absence of immediate intervention of the Central Bank to strengthen supply.
According to official data, the naira spot FX rate depreciated against the dollar amidst limited supply outweighed by demand pressure.
The NFEM rate weakened by ₦4.38 per US dollar to close at ₦1,456.20/$, AIICO Capital Limited said in a report, with transactions conducted between ₦1,457.00 and ₦1,454.00 per USD during the session.
The market expects the naira to close the year strong with ultimate exchange rate target of N1500 as worst case scenarios given the CBN intervention.
The authority maintains positive FX support for the local currency through 2025, signalling a deliberate action to ensure the local currency maintains stamina vs dollar amidst growing external reserves.
Latest data showed that gross external reserves position advanced to $45.47 billion, reflecting a +11.24% Year-to-Date (YTD) gain and day on day gain of ₦32.42 million. MarketForces Africa reported that the CBN told a forum that total external balance has surged to $46.7 billion, though official data shows otherwise.
Elsewhere, global oil prices fell below $60 a barrel on Tuesday, the lowest since May, as prospects for a Russia-Ukraine peace deal appeared to strengthen, raising expectations sanctions could be eased.
Brent crude dipped 151 cents, or 2.49%, to $59.05 per barrel, while U.S. West Texas Intermediate (WTI) receded by 128cents, or 2.26%, to $55.39.
In contrast, Gold rose on Tuesday after a U.S. jobs report showed the unemployment rate rose last month from September, reinforcing bets of rate cuts by the U.S. Federal Reserve and sending the dollar index lower.
Spot gold rose marginally by 0.08% to $4,306.22/oz, while U.S. gold futures inched up by 0.01% to $4,335.45/oz. Analysts at AIICO Capital expect markets to remain cautious to bearish, with oil prices supported by continued geopolitical concerns. CBN to Hike Rates on Treasury Bills after Bonds Repricing
