Naira Ends the Week in Red over Late FX Intervention
The naira ended the week in red as surging demand for forex forced the apex bank to rethink its willing buyer, willing seller, FX model with stance not to defend the local currency.
Critics had said the approach will not work due to Nigeria’s economic structure peculiarities. A country that depends on import to survive, feed about 230 million people should not consider floating her local currency, MarketForces Africa reported.
Nigeria’s rely on hydrocarbon sales to generate about 90% of her foreign currency receipts. At the moment, most of the oil exports revenue have been mortgage with FX swap deals.
NNPCL has entered into various oil-backed loans that would mean Nigeria has to service the agreement for sometimes before additional FX earnings would flow from hydrocarbon sales.
In the foreign exchange market, the naira experienced further depreciation in value as demand for US dollar, and other foreign currencies eclipsed total supply in the official window.
In the official Nigerian autonomous foreign exchange market, (NAFEM), the naira closed at ₦1,596.92 per US dollar on Friday, a 1.92% decline from the previous close, according to information from the FMDQ platform where official spot rate was quoted.
In the parallel market, the naira appreciated by 0.56%, ending the day at an average of N1,599 per US dollar following the apex bank decision to return to sell US dollar at below market rate to informal currency traders.
After its stance not to defend the naira, the Central Bank of Nigeria has announced decision to return to the forex market to back up the naira from slipping through the next resistance level.
The exchange rates across forex market has inched to N1600 as a result of late FX interventions. The perpetual increase in foreign currency demand in the FX market caused the local currency to weaken against the US dollar.
Unfortunately, FX liquidity challenge has persisted as the authority failed to provide support for the naira since April after the local currency won ‘April Fool’ global praises, medal as best performing currency.
In the global commodity market at the end of the week, oil prices showed a mixed performance due to a strong US dollar and concerns about China’s economy, despite a tightening supply outlook.
Brent oil decreased by 0.58% to $84.54 per barrel, while WTI increased by 0.06% to $82.26 per barrel. In contrast, the price of gold fell by 0.45% to $2,409.70 per ounce. #Naira Ends the Week in Red over Late FX Intervention
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