Naira Rebounds Slightly after CBN Sells $66m to Banks
In a tight race in the foreign exchange market, the naira recorded last moment gain following negative moment in the past two weeks. On Friday, the US dollar of the naira appreciated by 36 basis points to N1,509.70 at the Nigerian Foreign Exchange Market (NFEM), according to data from the FMDQ platform.
In their separate note, analysts cited that improved liquidity was seen as the CBN participated at the FMDQ window to improve supply. In the official window, FX transactions were consummated between N1,480.00/$ to $1,522.00.
In the week, the Central Bank of Nigeria (CBN) conducted FX intervention sales with authorised dealer banks. The CBN intervened, selling about USD66.45 million to authorized dealers to boost US dollar volume at the Nigerian autonomous forex market amidst surging demand.
The forex market experienced voltalite money price movements in the last weeks, posted gain twice versus 8-day losses against the US dollar. Increased settlements of foreign obligations continue to drag the nation’s foreign reserves downward. Notably, the gross external reserves declined by USD307.19 million week on week to USD39.10 billion.
In the forwards market, the naira rates decreased across the 1-month contracts amidst uncertainties. FX forward contract for one month declined by -0.3% to N1,554.01 while the US dollar of 3-month contract slumped by 0.6% to N1,633.36. FX forward contract for 6-month tenor dropped by -1.0% to N1,749.31 while one year contract weakened by 1.1% to NGN1,948.97, according to Cordros Capital Limited.
Meanwhile, the local currency gained N5 in the parallel market to settle at N1,555, according to market reports reviewed. Consequently, the spread between the two markets narrowed to 3.33% from 4.22% the previous week, TrustBanc Financial Group Limited reported.
In the near term, analysts said they expect FX market liquidity to remain strong, driven by inflows from foreign portfolio investors (FPIs), supported by attractive carry trade opportunities and a relatively stable naira.
However, global uncertainties, including the ripple effects of US trade tariffs, pose a significant risk. “We anticipate that the CBN will maintain its interventions, particularly during periods of liquidity shortages. As a result, we foresee the naira holding steady in the short term”, Cordros Capital Limited said in a note. #Naira Rebounds Slightly after CBN Sells $66m to Banks Naira Dips as Nigeria’s Foreign Reserves Fall by $1.34bn
