Naira Rises Sharply on CBN Action, Rising FX Reserves
The naira rises sharply to N1,576 against the US dollar in the foreign exchange (FX) market following notice of FX sales to Bureau de Change (BDC) operators. The significant daily exchange rate movement was driven by improved FX liquidity conditions in the currency market yesterday.
MarketForces Africa reported that the Central Bank of Nigeria (CBN) announced $20,000 FX sales to BDCs at N1,579 per US dollar, capping the operators spread at one percent of their respective purchase rate.
The US dollar sold to BDCs reduced demand pressure in the parallel market and boosted investors’ confidence in the official FX market. Some analysts said the CBN may not sell FX through retail Dutch Auction System in September despite rising external reserves.
According to data from the apex bank, gross external reserves climbed to $37.868 billion on Wednesday on the back of steady growth in FX inflows in the economy.
But analysts said it is default for the apex bank to deploy the fx reserves to defend the naira because huge part of the balance has been pledged for external deals – including forward, swaps and oil backed loans.
At the Nigerian autonomous foreign exchange window, the naira appreciated by 5.48% against the US dollar, closing at $1 to ₦1,576.10.
The Naira closed at ₦1,675 to the US dollar in the parallel market after FX sales at discount rate but cap on spread. The positive developments, which include rising external reserves, and FX liquidity boost in the parallel market, reduce pressure in the Nigerian currency market.
The next FX inflows could push gross balance in the external reserves above $38 billion, analysts told MarketForces Africa, requesting the apex bank to set a timeline for FX sales auctions to quell the US dollar shortage challenge in the market. In the global commodities market, oil prices fell by nearly 3% due to a report stating that Saudi Arabia plans to increase production later this year.
At the time of the report, Brent prices dropped by 2.87% to $71.35, while WTI prices declined by 3.27% to $67.21. On the other hand, gold prices continued to rise, reaching $2,694.30 per ounce. #Naira Rises Sharply on CBN Action, Rising FX Reserves Naira Rises against US Dollar Ahead of Sept. FX Auction
