Naira Rises on CBN FX Swap Arrangement with Banks
The naira appreciated at the official market, buoyed by the Central Bank of Nigeria (CBN) liquidity intervention through FX swap arrangements with domestic banks, analysts said in a note without mentioning the total amount that passed through the system.
At the Nigerian Autonomous Foreign Exchange Market (NAFEM), the naira strengthened by 0.38% to close at N1,584.50 per US dollar, according to Cowry Asset Management Limited. In the parallel market, the local currency declined by 0.31%, ending the day at N1,620 per dollar.
The CBN FX spot rate slipped slightly to 1584.95 as external reserves continue to grow, reaching $38.544 billion. Some market critics are of the view that the naira stability is not sustainable without the CBN FX intervention.
“As the Naira experiences a rare period of stability, one might think this is a sign of positive momentum in Nigeria’s economy. But the reality is far more complex”, Verto said in an update.
Behind the scenes, analysts at the firm noted that the CBN is grappling with unprecedented USD demand, fluctuating political pressures, and a delicate balancing act to maintain liquidity without depleting foreign reserves.
Nigeria’s economic landscape has undergone a dramatic transformation – from FX reforms to fuel subsidy removals, naira devaluation, and FX backlog clearing, the CBN has been busy implementing a range of measures aimed at bolstering the economy.
“By all accounts, the CBN has continued to intervene daily to the tune of $50 million–$100 million, but the general consensus is that this is intended to simply keep supply trickling into NAFEM rather than materially holding the rate stable”, Verto FX said in its macro update.
Analysts anticipate a gross external reserves boost to support the Apex Bank’s ability to sustain its mild to aggressive forex market interventions. But they also noted that uncertainties in the global commodity market remain a downside to foreign reserves growth.
The crude oil market is currently experiencing increasing volatility, reflecting the intense pressure it faces from multiple fronts—ranging from bearish signals in the U.S. market to potential geopolitical escalation in the Middle East and OPEC’s optimistic forecasts.
“In my view, this conflicting mix of factors is creating what can be described as a “strategic oscillation” in oil prices, where investors and traders struggle to identify a clear short-term trend, even though the prevailing indicators lean toward a downward trajectory”, Rania Gule, Senior Market Analyst at XS.com said in a note. Dangote Refinery to Commence Polypropylene Export
