Naira Sees Gains Across Markets After CBN FX Payment
The Nigerian naira closed trading session on Wednesday appreciating to #1605.54 per unit of US dollar at the autonomous FX market. The exchange rate also improved further at the unofficial market with the FX gap closing at N55 yesterday.
The local currency strengthening followed a lower forex demand by corporates and other eligible users across sectors versus total market supply. Recent moves by the authority to boost FX liquidity in the market have not impacted exchange rates significantly.
Central Bank of Nigeria (CBN) announced that it cleared $400 million from FX backlog after the claim was successfully verified. The authority has a $2.2 billion FX backlog which it is contesting after third-party audit.
However, analysts maintain there is hope amidst the apex Bank’s claim that the local currency is grossly undervalued. To upturn the negative movement and perception about the naira, there’s a need for large FX inflows into FX windows, analysts told MarketForces Africa.
The future of the local currency hangs on reduced import taste of the citizens and generate more FX receipts from export, LSintelligence Associates Research note shows.
At the alternative FX market for invisible trades, the local currency has continued to gain strength against the US dollar following combative measures introduced recently by the government.
Binance has become a shadow economy receiving more than $26 billion from local investors betting through crypto exchange platforms.
MarketForces Africa gathered that Binance allows peer-to-peer trading, pegging NGN-USDT lots above parallel and official market rates.
Nigerians have been betting against their local currency for quick bucks for decades but now as much as seen in the latest trend. This reduced FX stability and worsened market rates as the parallel market became a benchmark for trades for fintech and payments gateway platforms.
Banks have also used naira disadvantages to their advantages to boost earnings. Critics believe local bankers made huge income from FX policy lapses over the decades.
Recently, the Apex Bank accused banks of sharp practices. With a flurry of circular targets at correcting loopholes, the central bank directed Nigerian lenders to sell down their foreign assets holdings.
According to data from FMDQ, NAFEM turnover decreased by -18.0% or – USD195 million week on week to USD890.6 million on Friday. Meanwhile, the NAFEM window recorded an inflow of USD53 million.
On 16 February, the CBN injected USD180 million into the NAFEM window, accounting for 34% of the total forex inflow -the first injection after halting intervention for 19 consecutive weeks.
Foreign portfolio investors (FPIs) accounted for 17.2%, non-bank corporates accounted for 18.0%, exporters accounted for 28.9%, and others accounted for 1.9%.
The exchange rate strengthened further at the unofficial market, spot rate appreciated by 2.08% in the parallel market, closing at N1,555 per dollar on Wednesday. Thus, FX gap between official and unofficial market quotes inched to N55. #Naira Sees Gains Across Markets After CBN FX Payment
