Naira Lost Against Dollar as Parallel Market Spreads Widen
Nigeria’s local currency, naira, lost against the United States dollar in the just concluded week at Investors and Exporters window as spreads between official and parallel market rates widen further.
Struggling to stem speculative opportunity, some analysts called the apex bank’s decision to cut off bureau de change operators from the dollar sales channel as knee jerk. As such, analysts see naira trading low against the greenback at the parallel market above N500.
UPDATE: Today, naira hits N527 in the parallel market, though banks quoted the local currency at N413 Monday across the counters.
Currencies traders at the black market space continue to enjoy widening spreads as demand rises amidst supply shortage in the official channels. Last week, Nigerian banks read the riot act to customers over a potential breach of the Central Bank (CBN) foreign exchange policy.
Banks told customers it is financial crime to access the greenback or other foreign currencies without using it for the intended purpose or any form of sharp practices that can put pressure on the CBN.
Last week, Naira depreciated against the dollar in most market segments amid stronger demand relative to supply, Cowry Asset said in a report.
According to data from FMDQ, the local currency depreciated by 0.08% to N412.00 at the Investors and Exporters FX window despite the rise in external reserves by 0.22% in the week to US$33.57 billion.
The exchange rate also depreciated at the Bureau De Change and Parallel markets by 0.78% and 0.97% to close at N520.00 and N524 respectively, according to FX market check as unmet demand at the official channels faced the alternative market segments.
Meanwhile, the exchange rate closed flat at N380.69 to a dollar at the Interbank Foreign Exchange market amid weekly injections of US$210 million by CBN into the forex market.
A total sum of US$100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), US$55 million was allocated to Small and Medium Scale Enterprises and US$55 million was sold for invisible.
Elsewhere, Naira appreciated for most of the foreign exchange forward contracts as Spot rate, 1 month, 2 months, 3 months, 6 months and 12 months contracts declined by 0.11%, 0.19%, 0.27%, 0.69% and 1.34% to close at N411.78, N413.00, N414.39, N418.73 and N428.55 respectively.
“We expect the investors and exporters rate foreign exchange rate to trade around current levels. However we may see sustained exchange rate gap between the official channels and the parallel market amid growing demand pressure”, analysts at Cowry Asset noted.
At the investors and exporters foreign exchange window, total turnover decreased by 24.9% in the week to US$404.96 million, with trades consummated within the NGN400.00 – 424.25/USD band.
“We expect improved liquidity in the Investors and exporters window over the medium term, given our expectation of increased oil inflows in line with the rise in crude oil prices and inflows from foreign currency borrowings (US$6.18 billion) and IMF SDR (US$3.40 billion)”, Cordros Capital projected.
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Accordingly, analysts are expecting the naira to remain relatively range-bound N410.00 –N415.00 a dollar at investors’ window.
Naira Lost Against Dollar as Parallel Market Spreads Widen
