Naira Falls across FX Markets as Foreign Reserves Drop
Traded at N436.33 to a United States (US) dollar, the Nigerian local currency, the naira, tumbled across foreign exchange markets amidst rising demand for the greenback while external reserves see a fresh drop in weeks.
Exchange rates at the Nigerian Autonomous Foreign Exchange fixing rate (NAFEX) and black market worsened as foreign currencies user logged higher demand which clouded dollar supply in the market.
During the week, the Naira depreciated by N6 week on week to close at N708 from N702 as continued demand pressure stay unabated in the face of declining reserves and low earnings from oil exports.
MarketForces Africa reported that Nigerian oil production dropped below one million barrels per day, according to regulatory data released.
Data tracked on currency movement on the Central Bank of Nigeria showed that Nigeria’s FX reserves declined by $81.74 million to $38.92 billion after three consecutive weeks of accretion. Lower foreign currencies inflow and scarce ideas or strategies on how to drive economic growth via industrialisation top Nigeria’s FX pressures.
At the Investors and Exporters foreign exchange window, the naira depreciated by 1.1% to N436.33 per the United States dollar. In the black market on Friday, the exchange rate worsened to N708.00.
The volume of dollars transacted at the Investors and Exporters FX window declined by 62.2% from the beginning of last week to USD282.85 million on Thursday, Cordros Capital said in a market note. Analysts noted that trades were consummated within the N425.00 – N437.50 per US dollar band.
In the Forwards market, the naira depreciated 0.3% to N435.83 for a 1-month contract but appreciated 0.1% to N452.19 per dollar 6-month contract and 0.3% to N476.36 for 1-year contracts. Conversely, analysts said the naira was flat at N440.30 for 3-months.
Analysts at Cowry Asset Management think panic buying in the market resulting from the news that some foreign airlines plan to sell flight tickets in foreign currencies, drove many FX users to begin a prowl for the greenback for personal and business travels.
The investment firm noted that the apex bank’s interventions in the FX space have always seen the street traders being ignored with funding. The Interbank foreign exchange market traded in the mixed bag as the FX spot closed flat at N430.00amid CBN’s weekly injections of over US$250 million into the market to cushion the Naira from free fall.
“We expect the Naira to depreciate further across all segments of the FX market as a result of growing dollar demand pressure”, Cowry Asset said in its market note. READ: T-Bills Yield Falls 2 Basis Points as Naira Holds Position
As of Friday’s close, the open indicative rate closed at N433.83 to the dollar on Friday. An exchange rate of N437 to the dollar was the highest rate recorded within the day’s trading before it settled at N436.33, according to data from the FMDQ Exchange platform.
The Naira sold for as low as N425 to the dollar within the day’s trading. A total of 66.02 million dollars was traded at the official Investors and Exporters window on Friday. # Naira Tumbles in FX Markets as External Reserves Fall