Naira Falls to N1549 as Demand for Dollar Eclipses FX Supply
The naira fell against the US dollar to N1549, according to data from the Central Bank of Nigeria (CBN) foreign exchange platform. The Nigerian local currency experienced mild demand shock amidst FX intervention slowdown, with transactions consummated between N1547.50 and N1550.50 per dollar before closing at N1549.03.
Despite pumping $86.6 million into the forex market last week, there were additional inflows from foreign portfolio investors (FPI), exporters, and non-bank corporates. The Nigerian forex market has appeared to be relatively dry in the last two days, causing the exchange rate to bump for two consecutive days in a row.
US dollar inflow into the currency market settled at $1.03 billion last week, and most of the inflows were brought forward by foreign investors, who accounted for 67.29%.
The inflows marked the highest contribution for the fifth week in a row, signalling sustained foreign investors’ interest in the Nigerian fixed income market, according to Coronation Research.
The non-bank corporates followed closely with 13.36%, while the exporters contributed 10.87%, and others contributed 0.17%. The market recorded $86.6 million in FX inflows from the CBN as an intervention to ease demand pressure for foreign exchange.
Analysts expect Naira to trade within a narrow range, with a mild bias for appreciation if foreign portfolio investor inflows and supply from exporters and corporates are sustained. However, lingering demand pressures may limit gains. “We are also watching the divergence of the parallel market rates from the official rate to see if this continues, suggesting a disconnect in the fx market”, Coronation Research said.
In the global commodity market, oil prices dropped roughly 5% on Tuesday, hitting a two-week low amid hopes that the ceasefire between Israel and Iran would ease fears of supply disruptions in the Middle East. However, uncertainty remained as U.S. President Donald Trump accused both nations of violating the newly declared truce just hours after its announcement.
Brent crude futures slid $3.29, or 4.6%, to $68.19 a barrel, while U.S. West Texas Intermediate (WTI) crude lost $3.20, or 4.7%, to settle at $65.31. Meanwhile, gold declined sharply as demand for safe-haven assets weakened. Spot gold dropped 1.6% to $3,313.63 an ounce after earlier falling more than 2%.
Analysts expect OPEC+ to approve a 400,000 barrel/day production hike within ten days, with prices testing the $60-$65 range later this quarter as global output rises and seasonal demand weakens, potentially causing significant inventory builds. #Naira Falls to N1549 as Demand for Dollar Eclipses FX Supply Nigeria Boosts Trade Surplus to N5.17trn as Imports Taper
