Naira Juggles above 463 at Forex Market

Naira Juggles above 463 at Forex Market

The Naira weakened against the United States dollar at Investors, Exporters’ FX window, trading lower at N463.37. Conversely, the parallel market appreciated by 0.44% to N741 from N744, according to FX trading data

The Nigerian local currency, the naira, had on Tuesday appreciated by about 0.1% to N462.88 per United States (US) dollar at the Investors’ and Exporters’ foreign exchange (FX) window.

MarketForces Africa reported that the exchange rate opened the week at N463.25 after crossing the resistance level amidst surging demand for FX.

The exchange rate has been juggling between N460 and N465 in 2023 amidst foreign currency scarcity.  In the parallel market, the naira was priced at ₦744 to a US dollar from N747.

There is a weak upside to the Nigerian naira gaining strength due to the low capacity to earnings foreign currencies amidst dwindling export data.

For the year, analysts have maintained the need for devaluation of the local currency near its fair value. In the latest race to support the local currency, the central bank has begun to step up market intervention.

However, the move has started having large impacts on the foreign reserves balance, calling its sustainability into question. To keep the naira rate steadies, the Central Bank of Nigeria maintains weekly FX auctions.

At the close of business on Tuesday, Nigeria’s gross external reserve was last reported at $35.39 billion at the time when crude oil started seeing higher prices.

Data from the market showed that oil prices closed right on the $85 per barrel threshold. Weak investment in oil infrastructure affected Africa’s largest economy to benefit from the oil boom.

Still, a daily production volume of 1.3 million barrels remains behind the Organisation of Petroleum Exporting Countries (OPEC) and its allies (OPEC) 1.88 million barrels per day quota.

Listed companies reported FX losses due to negative movement in the exchange rate, according to audited reports from the stock market. Last year, the naira was weakened by about 11%, exposing manufacturers to FX losses. Naira Lost 11% as Banks Issue New Update on FX Spending

Analysts believe the trend will persist as manufacturers continue to demand imported raw materials and services for further production amidst a lack of comparative advantage in the local economy. 

In the global market, the dollar index declined as countries begin to de-dollarise their economies, shifting attention to the Chinese Yuan as the base currency for large deals.