Naira Gains Uninterruptedly, Settles at N1535 in FX Market
The naira experienced an uninterrupted gains spanning five days due to efficient and transparent FX trading on the Bloomberg BMatch system. The local currency is more into the game of show of strength against the US dollar which has dominated key transactions even at the local level.
Helped by strong forex inflows, and unbeatable trade transparency, exchange rate appreciated by about 8.23% or N138 week on week on BMatch system uninterruptedly. Even more, there is positive expectation that the local currency would continue to find value as the level of FX liquidity in the market at the close of session remained heavy.
By consensus, market analysts are of the view that electronic FX trading platform attracted strong inflows throughout the week as foreign portfolio investors’ confidence improved.
According to a slew of FX analysts, the naira appreciated steadily due to increased supply from exporters and foreign portfolio investors and weak importer demand. The NAFEX rate closed the week at N1,535 marking a significant improvement from the previous sessions.
This also suggest that exchange rate outlook is positive given that year end imports have started declining. A number of financial experts and industrialists told MarketForces Africa most of the foreign currencies liabilities by importers, companies have been settled or carry forward depending on applicable terms.
“We expect further appreciation in the Naira amid improved supply and weaker demand”, AIICO Capital Limited said in an update. Recall that the Electronic Foreign Exchange Matching System (EFEMS) was launched on Monday by the Central Bank of Nigeria (CBN) to streamline foreign exchange transactions.
At the same time, gross balance in foreign reserves grew by USD68.65 million to USD40.30 billion. External reserves would increase further with disbursement from Eurobonds and the remaining balance from World Bank loan.
Data showed that the Nigerian autonomous foreign exchange market (NAFEM) turnover decreased by 26.3% to USD1.80 billion on Thursday with trades consummated within the N958. – N1,710 per dollar band.
In the forwards market, the naira rates increased across contracts, One month forward fx contract gained 5.1% to N1,620.44, three month rose by 3.8% to N1,711.20/, six month contract appreciated by 5.6% to N1,788.12 while one year contract gained +5.5% to N1,995.14 per US dollar.
FX market liquidity is expected to remain strong in the short term as attractive naira yields and a more efficient FX trading system, given the implementation of EFEMS, continue to support inflows from FPIs, Cordros Capital Limited said in a note
“We anticipate the recently issued Eurobond -USD2.20 billion – to bolster the CBN’s capacity to support market liquidity.
“This is likely to further strengthen the naira in the near term. Nonetheless, we highlight that the upside risk to the naira remains, which includes the increasing geopolitical tension”. Cordros said. In the parallel market, the naira gained N213.00 to close the week at N1,515 per US dollar.#Naira Gains Uninterruptedly, Settles at N1535 in FX Market# AIF 2024 Closes with $180bn in Investments, Renewed Commitment
