Naira Drops as CBN Slows Down US Dollar ‘Pumping’
The naira depreciated by 0.12% to N1,543.03 per US dollar in the official market, a rate computed using data from Bloomberg BMatch. Data from the FMDQ platform confirmed the spot rate fell following mild foreign exchange market intervention by the Central Bank of Nigeria in the week.
The Apex Bank sold about USD50 million to authorised dealer banks to stabilise exchange rate pressure by boosting the FX liquidity. The CBN’s aggressive US dollar sales to banks have reduced strongly, suggesting that the authority targeted a lower exchange rate for the year—for record appraisal purposes.
In December, the CBN sold foreign currency to banks throughout the weeks to keep unfavourable exchange rate movement in check amidst rising external reserves, boosted by inflows from Eurobonds. Hence, the local currency gained more than 8% last month.
In the just concluded week, Nigeria’s foreign reserves declined by $31.56 million, the first time reduction in 5 weeks, to $40.85 billion. In the forwards market, the naira rates depreciated across the 1-month contract, losing 1.2% to close at N1,592.88 per greenback.
Also, the 3-month FX forward contract declined by -2.0% to N1,663.99 per US dollar, traders at Cordros Capital Limited said in their reports. The FX forward contract for 6-month fell by -3.6% to N1,775.56 while the 1-year contract declined by -5.6% to N1,993.02 per US dollar.
With the exchange rate at N1660 in the parallel market, the gap between official and informal currency markets is now printed at N117 per dollar. Analysts at Cordros Capital expect the FX liquidity to remain suboptimal despite CBN’s recent intervention, as foreign portfolio investors’ inflows have remained weak.
The Nigerian Foreign Exchange Market (NFEM) in December showcased a notable improvement in liquidity, largely attributed to the introduction of the “BMATCH” trading platform and increased dollar sales from exporters.
Throughout the month, the naira progressively strengthened, supported by a higher supply from foreign portfolio investors and weak importers’ demand for forex payments, AIICO Capital Limited said in a report.
Analysts at the investment firm revealed that the exchange rates fluctuated between N1,500 and N1,693, with the naira closing the year at N1,535.82 per US dollar, appreciated by 8.18% in the NFEM window.
In the global commodity market, oil prices trended higher on Friday, with Brent Crude at $80.29 per barrel and West Texas Intermediate (WTI) at $77.02 per barrel. #Naira Drops as CBN Slows Down US Dollar ‘Pumping’ FBN Holdings Records Huge Off-Market Shares Transactions
