Naira: Nigeria Back to Square One as FX Gap Hits N170
The Central Bank of Nigeria (CBN) may be back to square one as the gap between exchange rate quotes between the organised market for Investors and Exporters and the parallel market widened further.
Now, there is N170 gap between the exchange rate of N780 at the Investors’ and Exporters’ FX window and the parallel market’s spot FX quote of N950 on Thursday, creating upend advantages for speculative activities.
With the current development in the markets, the exchange rate reform has achieved nothing. Instead, the reform has increased pressures on Nigerians who have nothing to do with US dollar business – a term most economists dislike but haven’t been able to prove that devaluation benefits 133 million multidimensional poor Nigerian citizens.
Curious about the quality of naira reform believed to be politically influenced, some analysts told MarketForces Africa that devaluation of the local currency may have gone wrong. In contrast to expectations, convergence has now become an illusion as the apex bank was unable to flood the market with US dollars after FX liberalisation in June.
“We are back to square one”, analysts said, saying 41 items that CBN banned from accessing FX remain the key downside on account of a flood of FX requests passing through the open market.
In the parallel market, the exchange rate has continued to react negatively to a sustained increase in US dollar demand, trailing total market supply per day since the CBN stopped selling weekly FX to Bureaux de change operators.
Data from the FMDQ platform showed that the local currency was quoted at N780, having given up previous gains due to demand shock amidst tight supply. FX market data showed that Nigeria’s Autonomous Foreign Exchange Fixing rates settled at N769.10 yesterday amidst swinging forward rates.
At the official window for importers and exporters, the naira was exchanged for the US dollar at N758.12 midweek. The parallel market rate depreciated by 1.06% to N950 per greenback on Thursday as some fx users without access to the official rate flooded the open market to meet their needs.
Gross external reserves steady at $33.39 billion despite ongoing rally in the global oil market, trading at a 10-month high, market data showed. Brent crude rose 1.85% to $93.58 per barrel, while WTI crude gained 1.51% to $89.86 per barrel.
Oil futures were higher on Thursday due to expectations of tighter global supply despite an unexpected increase in US crude stockpiles. Despite this, there is a forex shortage in the country, though, oil production volume has picked. NNPCL had oil swap arrangement, though detail about the current position remains scanty.
Gold prices traded lower, with a 0.11% loss to $1,904 per ounce, as traders digested the European Central Bank’s 25-basis-point rate hike and stronger-than-expected US Producer Inflation data# Naira: Nigeria Back to Square One as FX Gap Hits N170 Naira Devaluation Deepens Economic Crisis in Nigeria
