Naira Exchange Rates Switch Positions in FX Markets
Speculators in the Nigerian foreign exchange market are currently earning a negative spread on their respective positions as the official rate now exceeds the transaction quote in the black market.
The switch in exchange rates positions between the two markets could last longer or short live depending on the Central Bank of Nigeria’s stance on FX direction and perhaps availability of additional inflows.
In the absence of demand pressures, the naira gained ₦2.34 to close at $/₦1,499.08 in the official market. The Nigerian Foreign Exchange Market (NFEM) remained stable, with trading rates fluctuating between $/₦1,495.00 to $/₦1,515.00.
Also, the exchange rate closed at $/₦1,490.00 in the parallel market as Bureau de Change, BDCs, operators saw sufficient US dollar stocks. >>BDCs
FX speculators with open positions may be losing at least N9 on each US dollar holdings. The naira exchange rate dynamics changed strongly on the back of sustained FX intervention; foreign investors improved confidence and zero backlog.
But a slew of analysts see the Central Bank of Nigeria’s (CBN) aggressive FX intervention as a short-term approach to solving long-term issues.
Analysts said the trend is not sustainable, making reference to April 1 2024 when the naira was ranked as best performing local currency in the world, and subsequent depreciation. The CBN FX intervention is already eating into the nation’s gross external reserves.
At the last check, Nigeria’s foreign reserves balance closed at $38.58 billion while Brent crude oil price traded lower at $72.50 per barrel amidst uncertainties in the global commodities market.
Oil prices remained near two-month lows as an unexpected rise in U.S. fuel stockpiles signaled weaker demand, while ongoing Russia-Ukraine peace talks pressured prices. Brent crude declined 31 cents (0.42%) to $72.71 per barrel and U.S. WTI fell 20 cents (0.29%) to $68.73.
Also, gold prices retreated following a record rally, with investors awaiting inflation data and updates on President Donald Trump’s tariff policies. Spot gold dropped 0.7% to $2,894.55 an ounce after hitting a record high of $2,956.15 on Monday. #Naira Exchange Rates Switch Positions in FX Markets CBN Rejects N1.6trn from Investors, Cuts Treasury Bills Rates
