Naira Plummets to N1690/$ after CBN Priced Spot Rate High
The naira depreciated sharply at the Nigerian autonomous foreign exchange market (NAFEM) due to a deepening FX liquidity shortage and higher spot rate pricing. As the exchange rate continues to worsen in the official market, the Apex Bank is also increasing spot rates at its FX auction sales to banks. The Central Bank of Nigeria’s (CBN) appetite to defend the naira has reduced significantly.
“What do you expect when the CBN itself is selling US dollars to banks at N1640? It means the end of the CBN’s price discovery journey that informed the huge devaluation in the first place,” analysts said in a chat with MarketForces Africa.
Spot data obtained from the FMDQ platform revealed that the naira plunged by 2.31%, closing at₦1,690.37 per US dollar at the official market. The local currency has remained unsettled despite FX intervention and a huge balance in the nation’s foreign reserves.
The Central Bank of Nigeria (CBN) has started pricing FX sales to authorised dealer banks at relatively higher rates, suggesting the naira has found its true value in the high-end range.
At the FX auction sales to local banks, the CBN sold about $144 million at spot rates that ranged from N1640 and N1650. The monetary authority has come to realisation that the exchange rate may not come back below N1000 except on the back of new resolve to achieve that feat.
FX sales to banks have been noted to be insufficient to redirect exchange rates in the official window. Analysts noted that parallel market rate fluctuation has now appeared less volatile compared with the official rate. In the parallel market, the naira closed at ₦1,735 to the US dollar, down by N5 on the day due to moderate increase in demand.
Elsewhere, oil prices rose slightly as hostilities between Russia and Ukraine escalated over the weekend. However, fears surrounding fuel demand in China and expectations of a global oil surplus put pressure on the markets. Consequently, Brent crude climbed to $73.10 per barrel, while WTI rose to approximately $68.98.
Similarly, gold prices recovered after experiencing losses for six consecutive sessions, with the increase attributed to a halt in the U.S. dollar’s ascent. Investors look forward to insights from Federal Reserve officials for guidance on the future direction of interest rates. Gold was priced at about $2,617.70 per ounce. #Naira Plummets to N1690/$ after CBN Priced Spot Rate High CBN Defends Naira with $39m in Forex Market
