Naira Lost N19 amidst $231m FX Sales to Banks
The naira lost about N19 against the US dollar as demand for foreign currencies continued to increase in Nigerian markets. The local currency fell at the official window due to insufficient US dollar supply to meet total demand logged in the forex market by eligible participant
Exchange rates weakened by N18.95, closing the week at N1,536.89 despite the fact the Central Bank of Nigeria (CBN) was in the market for seven consecutive sessions.
The CBN sold $92.10 million as the week ran down, bringing the total FX sales to $230.90 million amidst external reserves fluctuation. The nation’s gross external reserves tracked behind $38.4 billion, according to data from the CBN.
According to experts, a sustained high interest rate environment is the only guarantee that the naira will continue to trade in the exiting range as FX accretion depends on foreign portfolio investors interest in Nigerian markets.
The naira depreciated due to high demand, closing at N1,528.03 at the beginning of trading session last week and later settling higher at N1,532.93 per US dollar. By midweek, the CBN’s dollar sales of $38.65 million helped stabilise the exchange rate, leading to a slight appreciation to N1,530.52.
Further interventions totalling $92.1 million provided additional support, keeping the naira relatively stable at N1,530.62. However, by week’s end, the naira depreciated by 1.249% week on week, closing at N1,536.89, with trades ranging between N1,535 and N1,540.
In total, the CBN sold $230.85 million to authorised dealers to help manage sustained exchange rate volatility. Meanwhile, gross FX reserves decreased this week by $2.65 million to USD 38.36 billion.
This week, FX forward contracts were mixed. The naira rates increased across the 1-month fx forward contract +0.1% to N1,5780.82 to US dollar. The 3-month fx forward contract rose by +0.1% to N1,655.95.
Meanwhile, the 6-month FX forward contract dipped by -0.2% to N1,768.61, and the 1-year contract fell by -1.1% to NGN1,989.81 per US dollar. While market demand pressures have eased, near-term risks to naira volatility persist, Cordros Capital Limited told investors in an emailed note on Friday.
Analysts noted that foreign portfolio investment (FPI) participation in the FX market remains subdued, partly due to concerns over oil receipts amid lower oil prices.
Additionally, the potential for a surge in market demand looms, driven by the Dangote Refinery’s shift to selling petroleum products in U.S. dollars instead of naira following the expiration of the crude-for-naira deal.
Oil prices remained stable on Friday, poised for a second straight weekly gain as new U.S. sanctions on Iran and OPEC+’s latest production plans fuelled expectations of tighter supply. Brent crude futures inched up 8 cents, or 0.1%, to $72.08 per barrel, while U.S. West Texas Intermediate (WTI) crude gained 18 cents, or 0.3%, to $68.25.
Gold prices dropped over 1% due to a stronger dollar and profit-taking, though ongoing geopolitical risks and potential Federal Reserve rate cuts kept bullion on track for a third consecutive weekly gain. Seplat Energy Trades Flat Despite Price Sensitive Corporate Actions
