Naira Rises amidst Companies FX Losses Records
The Nigerian local currency, the naira, appreciated by about 0.1% to N462.88 per United States (US) dollar at the Investors’ and Exporters’ foreign exchange (FX) window.
MarketForces Africa reported that the exchange rate opened the week at N463.25 after crossing the resistance level amidst surging demand for FX. In 2022, the naira lost about 11% in the official window. Naira Lost 11% as Banks Issue New Update on FX Spending
The exchange rate has been juggling between N460 and N465 in 2023 amidst foreign currency scarcity. In the parallel market, the naira was priced at ₦744 to a US dollar from N747.
There is a weak upside to the Nigerian naira gaining strength due to low capacity to earnings foreign currencies amidst dwindling export data. Nigeria has continued to undermine the need for economic reforms.
There has been increasing interest in FX reforms to converge open market and official rates near a market clearing rate.
For the year, analysts have maintained the need for devaluation of the local currency near its fair value. In the latest race to support the local currency, the central bank has begun to step up market intervention.
However, the move has started having large impacts on the foreign reserves balance, calling its sustainability into question. To keep the naira rate steadies, the Central Bank of Nigeria (CBN) maintains weekly FX auctions.
At the close of business on Tuesday, Nigeria’s gross external reserve was last reported at $35.39 billion at the time when crude oil started seeing higher prices.
Data from the market showed that oil prices closed right on the $85 per barrel threshold. Weak investment in oil infrastructure affected Africa’s largest economy to benefit from the oil boom.
Still, a daily production volume of 1.3 million barrels remains behind the Organisation of Petroleum Exporting Countries (OPEC) and its allies (OPEC) 1.88 million barrels per day quota.
Listed companies reported FX losses due to negative movement in the exchange rate, according to their separate audited reports from the stock market.
Analysts believe the trend will persist as manufacturers continue to demand imported raw materials and services for further production amidst a lack of comparative advantage in the local economy.
Companies in the fast-moving consumer goods segment experienced FX losses more due to reliance on external inputs to support production. Dwindling naira, thus, expose their earnings to conversion risks.
In the global market, the dollar index declined as countries begin to de-dollarise their economies, shifting attention to the Chinese Yuan as the base currency for large sovereign deals. #Naira Rises amidst Companies FX Losses Records
