Naira Gains 1.2% in Value as CBN Sells FX to Banks

Naira Gains 1.2% in Value as CBN Sells FX to Banks

The Nigerian naira rebounded moderately at the Investors’ and Exporters’ foreign exchange window, a move that was supported by the Central Bank of Nigeria’s (CBN) decision to sell US dollars and other foreign currency to commercial banks.

However, the exchange rate worsened in the open market as a number of Bureau de Change sold US dollars at N1000 to invisible FX users amidst scarcity. For the local currency to gain traction, Nigeria must increase foreign currency earnings, either by pushing non-oil export or selling more hydrocarbons in the global market, research analysts at LSintelligence Associates told MarketForces Africa.

“The problem is the supply side. The net balance in Nigeria’s foreign reserves cannot be easily determined due to large obligations – swaps, forwards and other derivatives claims.

“While borrowing would have been an option, it is a bad time to visit the Eurobond market and the recent $700 million World Bank loan could only add minimal support to FX management”, LSintelligence said.

In the foreign exchange market, the naira continues to face significant pressures against the US dollar in the open market. FX market analysts projected that the exchange rate at the parallel market would cross N1000 in September with CBN intervention.

In its market update, Cowry Asset Management Limited said this alarming trend is primarily driven by a combination of factors such as dwindling foreign reserves, increased demand for foreign currency, and economic challenges. 

At the investors’ and exporters’ FX window, the naira gained strength by 1.21% week-on-week, closing at N747.76/$1 as the CBN supplied forex to deposit money banks, Cowry Asset Managers said in a commentary.

Meanwhile, at the parallel market, the naira depreciated by 4.50% week-on-week to a historic low of N998 as a result of limited FX inflows into the economy.

Analysts reported that Nigeria’s FX reserve closed flat at USD33.28 billion. At the Investors and Exporters FX window, total turnover at the window advanced by 52.3% to USD418.61 million on Thursday as trades were consummated within the N475.00 – N910.00 per US dollar.

In the Forwards market, the naira rates increased across the 1-month contract gaining 2.0% to N781.96, 3-month appreciated by 2.9% to N795.39, 6-month contracts gained 4.4% to N814.91 and 1-year contract jumped 5.8% to N867.80.

In the global market, Oil prices declined as markets reacted to the Federal Reserve’s indication that it might maintain higher interest rates for an extended period, despite refraining from a rate hike at its latest meeting.

Market data showed that West Texas Intermediate crude traded at around the $90 band per barrel and Brent crude at $93.50 per barrel on Friday. Meanwhile, the price of Nigerian Bonny Light crude oil closed positively at above $100 to $100.09 per barrel, up from the previous week’s $96 per barrel.

Cowry Research anticipates the naira to trade in a relatively positive band to show further appreciation at the various FX markets barring any distortions while the apex bank maintains its interventions to shore up the naira value. #Naira Gains 1.2% in Value as CBN Sells FX to Banks Naira Steadies as Banks Issue Update on FX Purchase