Naira Rates Diverge on FX Demand, Supply Strength
The Nigerian naira exchange rates diverged after the local currency was launched into recovery with FX backlog settlement by the apex bank. The exchange rate crossed to N809.02 from behind amidst demand and supply imbalance.
At the Nigerian Autonomous Foreign Exchange Market on Monday, data from FMDQ indicated the naira weakened while importers, manufacturers and other FX market participants’ US dollar demand logged outpaced the entire supply in the space.
According to forex data from FMDQ, the Naira depreciated by 4.24%, closing at N809.02 to the dollar in the official market, compared to the previous rate of N776.14. The exchange rate gap has moderated and speculators have developed hawkish sight to monitor trends in the market.
With visible actions to push the naira curve, the Central Bank of Nigeria is now saddled with managing the supply side effectively to avoid the exchange rate from relapsing from the recovery line. Naira is not safe yet even with FX backlog payments, there is a need to keep market sentiment positive, analysts explained to MarketForces Africa in a forum discussion.
In the parallel market, the Naira’s performance continued to strengthen as the local currency closed at N1,000 per dollar on Monday, compared to N1,030 previously. The open market returned to normalcy partially last week.
At the space, the local currency has continued to consolidate on its recent market sentiment-backed improvement from a record low of N1,310. The naira has hit successive record lows on the black market, where it trades freely, as excess demand on the official market gets funnelled to the unofficial market.
Last week, the apex bank said it had started clearing outstanding foreign currency forwards owed to banks. There was about a $7 billion FX backlog before the decision. The naira has been under pressure from past due obligations.
To reduce demand pressures in the parallel market, the Central Bank lifted restrictions on 43 items from accessing FX from an official window. Nigeria is expecting $10 billion in foreign currency inflows in weeks to improve foreign exchange market liquidity, the finance minister said at a meeting.
Elsewhere, The US dollar fell against its major trading partners early Monday, except for a small increase against the yen, ahead of a quiet data schedule this week that will turn the focus on appearances by Federal Reserve officials.
