Naira Rallies as Invisible Hands Balance Rates
The naira rallied midweek as invisible hands put a touch on exchange rates across the markets. Both official and parallel market rates appreciated against the dominant US dollar in the Nigerian economy.
In spite of the mild daily gain seen in the forex markets, analysts maintained that the exchange rate outlook remains on the downside. Though the Central Bank of Nigeria’s (CBN) decision to offset FX backlog reflated market sentiment, the impact has fizzled out as the naira has been on the losing side.
The yearend demand will shift exchange rates negative, research analysts at LSintelligence Associates said in a chat, raising concern that the apex bank market intervention has slowed.
The Nigerian naira post devaluation suffering in the foreign exchange market has continued with more downside in focus than tailwinds, experts told MarketForces Africa in separate chats.
In the past week, exchange rate swings at the official and parallel markets have been fast, negative and yet furious amidst a clouded economic outlook bedevilling Africa’s largest nation by population and size of gross domestic product (GDP).
On the economic side, Broadstreet analysts, and investment firms are less optimistic about the outlook. Higher rates and risks of more persistent inflation mean a tighter grip on household spending.
Already, there is pressure on the middle-class economy while on the base case, the resultant impacts of double whamming inflation and interest rates surge have worsened the misery index in a country where employment is a luxury.
The Naira gained at the Nigerian Autonomous Foreign Exchange Market (NAFEM) window, closing at N818.99 per US dollar from N850.22 per dollar the previous day.
Similarly, In the parallel market, the Naira also gained strength by 0.87% to close at N1,135 per dollar amidst positive global crude oil demand forecast in the commodities market.
ICE Brent crude declined by 0.87% to $81.75 per barrel, while the West Texas Intermediate (WTI) crude oil also declined by 1.41% to $77.16 per barrel. Naira Steadies as Banks Issue Update on FX Purchase
Despite the uptrend, and improved oil production volume, the external reserve has been on the tight, though there have been marginal increases over the past week. At the time of publication, data from the CBN showed that gross external reserves at around $33.4 billion.