Naira Falls by 3%, CBN Supports Local Currency with $1.03bn
In March, naira (NGN) rates worsened against the US dollar (USD) across the foreign exchange markets despite significant FX interventions in the official and parallel markets. The naira lost 3%, though the Central Bank of Nigeria (CBN) pumped more than $1 billion into official window to oil the forex market inflows.
A significant increase in US dollar demand heated up exchange rate equation, and this made the naira to struggle unsuccessfully against the greenback. The exchange rate trend witnessed in the official window suggested that the naira fortune would have worsened without aggressive FX interventions in the month of March.
The official window was relatively stable last week supported by improved dollar supply from the CBN. Early in the week, the CBN sold $41.6 million at rates between N1,527.50 and N1,531, helping to stabilised exchange rate fluctuation.
By midweek, the CBN injected an additional $27.9 million, with the NGNUSD pair trading within a narrow range, AIICO Capital Limited reported. Despite minor fluctuations, the exchange rate remained stable as demand slightly increased. On Friday trading ranged between N1,520.00 and N1,542.00, with the Naira appreciating marginally by 0.5bps week on week to close at N1,536.82.
In March, the CBN sold N1.03 billion to support the market, despite this the official exchnage rate depreciated by 3.00% to N1536 and parallel market rate fell by 3.23% to N1550, bringing its year-to-date gain to 0.09% and 6.13% in the official and parallel markets, respectively, according to TrustBanc Financial Group Limited.
The nation’s FX reserves declined for the second consecutive week by $913.14 thousand to $38.33 billion. In the forwards market, the naira rates increased across contracts. The 1-month FX forward contract appreciated by +0.5% to N1,572.44, the 3-month contract rose by +1.3% to N1,635.09, the 6-month contract climbed by+2.4% to N1,727.16 and 1-year contract rallied by +4.8% to N1,899.27 per dollar.
Analysts said they expect the CBN to continue supporting market liquidity amid weak FPI participation in the FX market. This will help maintain the naira’s stability at current levels in the short term.
Oil prices slipped on Friday as concerns grew that U.S. tariff disputes could trigger a global recession. However, prices remained on track for a third consecutive weekly gain due to escalating U.S. pressure on Venezuela and Iran.
Brent crude futures fell 49 cents, or 0.6%, to $73.54 per barrel, while WTI crude dropped 61 cents, or 0.9%, to $69.31. Meanwhile, gold surged to a record high as investors sought safe-haven assets amid trade war fears. #Naira Falls by 3%, CBN Supports Local Currency with $1.03bn Naira Tumbles as FX Demand Pressures Heat Up, Spread Reduces
