Naira Improves as Gross External Reserve Rises
The Nigerian local currency, the naira, trades at N420.50 to the United States dollar (USD) on Thursday while foreign or external reserves track below $39 billion. At the exchange rate, it is safe to say that Naira only made a moderate recovery after the exchange rate crossed N420 mark amidst dollar scarcity.
Rising moderately, the nation’s external reserves printed higher at $38.848 billion, from $38.818 billion following a $300 million inflow on Wednesday. The last 12-day movement shows that there has been an inflow into the nation’s reserves after a heavy decline in the previous months.
Foreign currencies’ accretion into external reserves has been weak as foreign investors keep away from the domestic economy amidst uncertainties in the macroeconomic environment.
Despite a high inflation rate, government borrowing costs have been suppressed until recently when the Central Bank of Nigeria (CBN) hiked the benchmark interest rate, thus triggering yields on fixed-income instruments repricing.
CBN Governor, Godwin Emefiele recently said the exchange rate pressures is beyond monetary policy alone. The apex bank maintains a stance not to devalue the local currency but forces of demand and supply keep correcting the rates.
Some investment bankers told MarketForces Africa that the apex bank is only postponing the inevitable, saying the naira is overvalued. Meanwhile, the naira is making a slower than expected recovery in the official window, according to data from FMDQ Exchange.
On Thursday, the exchange rate appreciated at the Investors and Exporters window, exchanging at N420.17 to the dollar, a 0.08 appreciation against N420.50 traded on Wednesday. READ: Interbank Rates Slide as Financial System Liquidity Improves
The open indicative rate closed at N419.79 to the dollar on Thursday. Traders said an exchange rate of N444.00 to the dollar was the highest rate recorded within the day’s trading before it settled at N420.17.
The Naira sold for as low as N410 to the dollar within the day’s trading. A total of 201.81 million dollars was traded in foreign exchange at the official Investors and Exporters window on Thursday. #Naira Improves as Gross External Reserve Rises
