Naira Disappoints, Loses 11.7% Despite FX Market Intervention
Contrary to expectations that FX market intervention would help the exchange rate level around N1,000 per US dollar at the official window as predicted by Goldman Sachs, the naira disappointed, according to data from the FMDQ Securities Exchange for the official daily quote shows.
The Nigerian naira ended the day downbeat, losing about 12% despite forex market intervention. In spite of renewed interest in foreign currency sales to local banks, the exchange rate has fallen fast and furiously in the past few days over surging demand for foreign currencies.
The local currency’s competitive strength has been wekened further, shadow by the FX float idea of monetary policy due to large import bills. Critics claim that because of the way the economy is structured, the naira cannot withstand the pressure of US demand in the forex market using the Central Bank of Nigeria’s (CBN) willing buyer, willing seller FX model.
The monetary authority’s decision to float the naira must be supported by strong foreign currency inflows, otherwise, the future of the local currency would be unpalatable; a Broadstreet analyst told MarketForces Africa.
According to the research team at LSintelligence Associates, it is dangerous to think that the naira can withstand ‘a currency exchange rate ‘willing buyer, willing seller’ policy against the US dollar in a country where there is no comparative cost advantage, forcing its people and businesses to rely on imports.
“It is more of liqudity than policy fabriaction is that simple. Government needs to focus on how to generate forex from whatever means. Then, the naira future would be secured – any other things would amount to nothing eventually”.
Data from the FMDQ platform showed that the exchange rate ran amok against the US dollar at the Nigerian autonomous foreign exchange market to settle N1,484.75. Investment firm, SAMTL Limited hinted in its market update that the apex bank intervened in the forex market without mentioning the amount.
After long holiday away from FX sales, the central bank recently resumed foreign currency sales to local deposit money banks to saturate liquidity level at the official market. The FX market’s demand pressure today resulted in a 11.66% daily depreciation of the naira. On the other hand, exchange rate clawback losses in the parallel market.
At the informal currency market on Thursday, the naira strengthened by 2.06% to close at N1,425 per US dollar. In the global commodity market, WTI crude futures and Brent crude prices were at $78.62 and $82.89 per barrel, respectively. #Naira Disappoints, Loses 11.7% Despite FX Market Intervention
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