Naira Devalues 0.2% at Investors, Exporters FX Window
Amidst the ongoing foreign currency crisis in Nigeria, demand for the United States (US) dollar negatively impacted the market rate at the official window on Thursday, according to market data. The naira loses 0.2 per cent against the dollar on Thursday, traded at N462 at the Investors’ and Exporters’ window.
This translated to a decline of 0.2 per cent in purchasing power of the naira when compared to the N461.09 it exchanged to the dollar on Wednesday. Broadstreet analysts’ consensus is that the Nigerian naira will be devalued as pressures continue to rise in the year.
The country is battling low foreign currencies inflow, a large FX backlog and declining external reserves. For weeks, Nigeria’s gross external reserves position has been declining and revenue receipt from oil remains unimpressive.
The FX market trading data showed that the open indicative rate closed at N461.50 to the dollar on Thursday. An exchange rate of N462.11 to the US dollar was the highest rate recorded within the day’s trading before it settled at N462.
The Naira sold for as low as N446 to the dollar within the day’s trading. Given the market heated market temperature, a total of 97.78 million dollars was traded at the official Investors’ and Exporters’ window.
The forex market has started to see another possibility of devaluation following the Nigerian banks’ decision to cut down their customers’ personal and business travelling allowance. For traders, a fifty per cent cut in business and personal travelling allowance is a red flag.
This will push Nigerians with foreign bills payable to seek foreign currency in the open market and then widen the gap between official and parallel market FX rates further – creating an opportunity for currency speculators.
In the first quarter of 2023, the parallel market surged to N760-780 following election spending and the cash crunch also added its own effects on the exchange rates across the space.
While analysts predicted that the exchange rate will hit N500, FX scarcity could further push the rate above this level before the year end.
“Nigeria is practically earning low from crude exports as confirmed by the Organisation of Petroleum Exporting Countries (OPEC) that production level printed at 1.3 million barrels per day – the best shot in the first quarter against 1.8 million barrels per day quota for the country.
For Nigeria to earn more foreign currency, the authority has no lasting solution or currency program while maintaining a stance to support the Naira via periodical market intervention – a currency management approach that appears to have failed to keep the local currency steadies.
A slew of currency analysts told MarketForces Africa that they think a gradual naira weakening is more likely in the near term, with very tight or non-existence upside risks remaining very tangible in such a volatile environment.
# Naira Depreciates 0.2% at Investors, Exporters FX Window