Naira Drops Against Dollar, Euro, Pound as FX Outflow Rises
The naira weakened against the US dollar, euro, and British pound in the foreign exchange market as demand for international payments and FX liability settlements outpaced liquidity.
The local unit lost 0.07% against the US dollar at the official window, closing at N1,332.9728, a slight drop in transitionary value quoted at N1332.0960 the previous day.
Reflecting a downturn in FX liquidity, transactions were conducted between N1332 and N1336 during the intraday trading session on Tuesday, according to data released by the Central Bank of Nigeria (CBN).
For forex market analysts, the intraday high of N1336 signals that the local unit could be under renewed pressure, a development that could prompt the CBN to sell US dollars to banks.
Meanwhile, CBN data show that activities of financial institutions, the market makers, at the Nigerian Foreign Exchange Market (NFEM) increased sharply on the day.
NFEM interbank FX turnover rose to $93.163 million, up 157% from $36.242 million the previous day. The number of deals closed in the interbank FX market also rose to 92, up from 49 in the previous session.
The Nigerian naira also lost 0.19% against the British pound at the official window, settling at N1,766.06. The official rate weakened by 0.19% against the euro, closing at N1,492.00/€.
In the parallel market, the dollar was unchanged at N1,375.00, and the gap with NAFEM narrowed to 3.15% from 3.22%, AIICO Capital Limited said in its FX update.
The FX market is expected to remain relatively stable, with the Naira likely to trade within a narrow range in the near term, Herwood Securities Limited told investors in its market update.
The investment firm said Market direction will remain influenced by dollar demand and supply conditions, while improved liquidity at the official window could help limit significant volatility.
