Naira Drops by 3.59% to ₦1,563 as FX Market Heats Up
The Nigerian naira depreciated further in the official currency market, down by 3.59% to N1,563.80 per US dollar despite foreign currency (FX) sales intervention by the apex bank last week.
The Central Bank of Nigeria (CBN) re-commenced US dollar sales to authorised dealers in the currency market to boost FX liquidity at the Nigerian autonomous foreign exchange market (NAFEM).
The monetary authority had pledged to stop defending the local currency after the naira was floated. The decision has not pan out positive as exchange rate plummet significantly since April rally.
Analysts said the CBN FX intervention was recommenced last week due to accretion into the nation’s external reserves, which peaked at a 13.-month high. Nigeria’s FX reserves expanded further last week as the gross reserves grew by US$507.09 million week on week to US$35.28 billion.
The CBN sold about US$94.00 million at an average of N1,504 to banks during the week. At the NAFEM, total turnover increased by 14.3% to US$943.29 million on Thursday.
An investment firm reported that trades were consummated within the N1,465 – N1,590 band. In a note, Cordros Capital Limited said that although market liquidity improved on mild intervention from the CBN, it remained insufficient to drive a significant appreciation in the naira, as demand for FX continued to outweigh supply.
Looking ahead, analysts said they expect the naira to remain under pressure due to the muted FX supply from the CBN and weak inflows from foreign portfolio investors (FPIs).
The exchange rate in the informal currency market also came under pressure last week. The FX rate in the parallel market closed at ₦1,540 per US dollar as demand for invisible FX transactions increased.
In the global commodity market, the price of crude oil closed lower on Friday due to strong bearish sentiment at the beginning of the week. Brent oil fell by 1.35% to reach $85.37 per barrel, while WTI declined by 0.57% to $83.16 per barrel. #Naira Drops by 3.59% to ₦1,563 as FX Market Heats Up Naira Suffers Big, CBN Goes Ballistic Against FX Whales
