Naira Plummets as CBN Sells US Dollar to Banks at Higher Rate
The future of the naira looks bleak under the current administration as the authority appears to have given preference to growing the nation’s external reserves over stabilisation of the the local currency.
The Apex Bank has reversed position on its previous stance the the naira is grossly undervalued. Now, the authority is selling US dollar to banks at N1640 -suggesting that exchange rate true value has settled – latest pattern revealed the authority seeks to maintain FX rate at the range of N1600 and N1700 per US dollar.
The naira has lost its allures versus peers in the African foreign exchange markets. The historical exchange rates among African peers like Benin Republic, Ghana and others have reversed as the monetary authority continues to chase the air.
The Naira closed the week weaker at the official market, trading at N1,678.87 to the US dollar as the Central Bank of Nigeria (CBN) sold FX to banks at higher rate at this week auction.
Data from the official trading platform of the FMDQ Exchange, revealed that the Naira lost N39.37 in a swoop as demand for foreign currency outpaced market supply. This exchange rate movement translates to 2.4 per cent loss when compared to the previous trading date on Thursday when it exchanged at N1,639.50 to a dollar.
However, the total daily turnover increased to 1,403.76 million dollars on Friday up from 244.96 million dollars recorded on Thursday. At the Investor’s and Exporter’s (I&E) window, the Naira traded between N1,698.50 and N1,609.00 against the dollar.
In the just concluded week, the US dollar liquidity improved in the Nigerian autonomous foreign exchange market, but the interbank market remained under pressures.
This kept rate tight as eligible FX users logged higher demand in the official market. Due to high foreign exchange demand, spot FX traded range between N1,591.60 and N1,705.00 per greenback.
While analysts anticipated a need to defend the naira, the CBN intervened once, selling approximately $51 million at ₦1,640.00. Despite this, the naira depreciated by 0.73% over the week, closing at $/₦1,678.87 in the NAFEM window.
Elsewhere, Oil prices dropped as fears about Hurricane Rafael’s impact on U.S. Gulf infrastructure eased and new Chinese economic stimulus emerged. Despite reversing nearly 1% gains from the previous day.
Brent and US WTI are still set to end the week 2% higher. Investors are also considering how President-elect Donald Trump’s policies might influence oil supply and demand. Brent traded around $73.90 per barrel, WTI at $70.40, and gold at $2,695.20 per ounce, marking its steepest weekly decline in over five months. #Naira Plummets as CBN Sells US Dollar to Banks at Higher Rate Oil Rises on Middle East Tensions, OPEC+ Output Decision
