Naira Hits N465.13 after Worsening Inflation Data
After maintaining its cool against the dominance of the United States (U.S.) dollar at the official window, the Nigerian naira has gone through a downward trend this week, hitting a new low on Wednesday.
Nigeria’s weak local currency has forced an increase in demand for foreign-denominated assets as market players, local investors, and manufacturers begin to hedge their exposure with foreign currency assets.
A softer naira was spurred by negative signals from inflation data as market participants logged requests for dollar supply amidst FX scarcity across the nation.
The Naira depreciated against the dollar amidst an imbalance in FX demand and supply; exchanging for N465.13 at the investors’ and exporters’ window.
Market players submitted more requests for forex payments than readily available, thus pushing rates higher as the total volume of U.S. dollars transacted undercut demand.
The latest exchange rate print represented a decrease of 0.10 per cent when compared to the N464.67 it exchanged for the dollar on Tuesday.
The open indicative rate closed at N463.79 to the dollar on Tuesday. A spot exchange rate of N466.89 was the highest rate used for trading within the day before it settled at N465.13.
The spot exchange rate is determined instantly. The Naira sold for as low as N460 to the dollar within the day’s trading. A total turnover of 267.04 million dollars was traded at the official Investors’ and Exporters’ window.
FX spot rate was adjusted last week to N466 per United States dollar. However, the naira moved positively ahead of the inflation report. In April, the statistics office said headline inflation accelerated by 18 basis points to 22.22%.
By market consensus, analysts estimated that the naira is trading above its fair value but the Central Bank of Nigeria (CBN) still maintains a no-devaluation stance.
A devaluation would raise the poverty index upward, trigger joblessness and manufacturers’ concern’s production costs will surge. With regard to an official devaluation of the naira, analysts told MarketForces Africa that the monetary authority is between the devil and the deep blue sea. #Naira Hits N465.13 after Worsening Inflation Data