Naira Reclaims Value as FX Market Liquidity Tightening Eases
The Nigerian naira reclaimed value, appreciated by 1.36% day on day in the foreign exchange (FX) market as demand and supply positions favoured the local currency on Thursday.
While the naira recorded gain after downhill movement in the previous, the nation’s foreign external reserves dropped further. The successive daily decline in gross external reserves balance may not be unconnected to huge FX auctions.
Some analysts are of the view that the a significant portion on the country’s foreign exchange reserves has been pledged for external deals including FX swap, and oil backed loan agreement by NNPCL.
The Central Bank of Nigeria (CBN) has altered its position not to defend the naira in the currency market. The reintroduction of retail Dutch auction system signpost a move to redirect the exchange rate trajectory.
According to data from the FMDQ, the naira strengthened against the US dollar, appreciating by 1.36% to ₦1,564.48 per US dollar. Investment experts expect the naira to end the week positive given the improved FX liquidity in currency market.
The recent Retail Dutch Auction in the Foreign exchange market is expected to reduce FX demand pressure and stabilise the naira, analysts told MarketForces Africa in a chat.
Last week, the Central Bank of Nigeria (CBN) conducted a Retail Dutch Auction where USD815.36 million was auctioned to retail-end users, predominantly manufacturers, out of a total bid value of USD1.19 billion.
The cut-off rate was set at N1,459, below the Nigerian autonomous market rate of NGN1,596.20/USD as of the same period. Analysts said they expect this to mitigate the exchange rate pass-through effect on consumer prices in August, particularly for imported food and non-food items.
The naira exchange rate closed at an average of ₦1,585 per US dollar in the parallel market. FX spot rate at the informal market has been relatively steady in the absence of shock in the official window.
In the global commodity market, Brent crude increased by 1.81% to $81.20 per barrel, and West Texas Intermediate (WTI) crude advanced by 1.69% to $78.28 per barrel. #Naira Reclaims Value as FX Market Liquidity Tightening Eases Inflation Rate Declines to 33.40% in July
