Naira Gains amid Unmet Foreign Currency Demand
The Nigerian naira claimed value amidst unmet demand in the foreign exchange (FX) market. At the investors’ and exporters’ foreign exchange window, the Nigerian naira was exchanged at N461.75 per the United States (US) dollar on Friday.
This represents a gain when compared with exchange rate of N462 reported at the window in the previous week. In the week, activities level improved by 2.6% to $496.6 million over positive sentiment in the oil market.
Oil prices traded at above $88 per barrel over the expectation of increasing demand in China after Beijing re-opens its economy. On Friday, Bonny light crude price rally in the oil market by 1.4% to close at $87.69 per barrel from $86.47 per barrel.
Market data indicates that FX trades recorded in the official window were consummated within the N440.00 – N483.38 band. By consensus, analysts have projected the exchange rate to cross N500 in 20223.
In 2022, the naira lost about 11% after the Central Bank of Nigeria devalued the local currency quietly in the last quarter of the year. Meanwhile, due to a sustained rise in unmet demand, analysts said FX backlog continues to pile while manufacturers, importers and travellers turn their attention to the open market in the search for the greenback.
At the parallel market, the dollar depreciated 0.9% against the priced currency to ₦750.00 following a record decline in external reserves, according to figures on the Central Bank of Nigeria (CBN) website.
Last week, Nigeria’s FX reserves declined by $122.34 million w/w to $37.07 billion on account of CBN intervention in the currency market. Cordros Capital analysts maintained that believe the FX liquidity issues will remain over the short-to-medium term, saying they do not see any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels.
At the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchained from the previous week as it closed the week at N445. >>> Naira Depreciates to N462 at Investors, Exporters FX Window
In the forwards market, the contract rate for the 1-month was flat at N479.76. However, there were depreciations recorded in the 3-month contracts, down 0.5% to N488.83. Also, 6-month contracts decline 1.2% to N506.47 while 1-year contracts depreciated 0.2% to N532.70. #Naira Gains amid Unmet Foreign Currency Demand