Naira Recovers Faintly from Overwhelming Demand for US Dollar
The Nigerian naira recovered from the US dollar and other foreign currency demand invasions in the just concluded week in the official window, with moderate heat coming from the parallel market.
The intermittent recovery has been partly supported by FX sales to banks and other authorised FX dealers. That has not been able to keep the local currency strong as the Central Bank of Nigeria (CBN) maintain FX intervention on a lower scale.
MarketForces Africa gathered that the scary demand at the August retail Dutch FX auction has caused the CBN to retraced steps.
“This country cannot survive with $1.1 billion FX sales as seen at the last Dutch Auction System sales – which may be the last as the CBN has already retraced without mentioning the next step”, an expert said in a chat with MarketForces Africa.
The CBN has been selling US dollar to banks while scarcity lingers at the parallel market for invisible transactions. This spillover off US dollar shortage filtered into the official window and caused naira to run amok in the past few weeks.
“There is a bleak future for the naira. First, FX policy has been inconsistent. It is not really clear if the naira has finally settled. It appears the CBN conduct FX sales only when naira is above N1600 benchmark.
“Surprisingly, the CBN also sold FX to banks at N1630 – suggesting that the authority is now comfortable at that range even with the sustained increase in gross external reserves”, Broadstreet analysts said at MarketForces Africa Analysts Forum on Friday.
The Naira appreciated by 0.52%, closing at ₦1,666.72 per us dollar at the official market. In the Parallel market, the Naira closed at ₦1,730 to the dollar.
Data from the official trading platform of the FMDQ Exchange, a platform that oversees the Nigerian Autonomous Foreign Exchange Market (NAFEM), revealed that Naira gained N8.77 compared to the previous trading on Thursday, when it exchanged at N1,675.49 to a dollar.
The total daily turnover, however, reduced to 94.20 million dollars, down from 166.61 million dollars recorded on Thursday. At the Investor’s and Exporter’s (I&E) window, the Naira traded between N1,685.00 and N1,600.00 against the dollar.
“Keeping interest rate high is part of the Central Bank of Nigeria (CBN) efforts to management exchange rate volatility as the fiscal side continue borrowing spree.
“The private sector is starved with funding with continuous liquidity mopping up in the financial sector. In its latest data, credit to the private sector bumped on the back of Treasury and OMO auction sales worth about N1.34 trillion in September,” analysts said, saying the future of the local currency depends largely on FX intervention, not export flow that has remained underwhelming. CBN Defends Naira with $39m in Forex Market
