Naira Sees Market-Wide Rally on Robust U.S. Dollar Liquidity
The Nigerian naira posted gains against the U.S. dollar across both the informal and official foreign exchange windows on Monday, driven by robust FX liquidity in the official window.
Analysts said the local unit strengthened, signalling strong forex market liquidity sufficient to meet demand, in contrast to the weak performance posted last week.
The Central Bank of Nigeria (CBN) daily FX update revealed that the naira gained 0.11% to settle at N1,329.8019 at the official window on Monday, from N1331.2027 quoted on Friday.
FX trades were conducted between N1327.0100 and N1336 per US dollar at the Nigerian foreign exchange market (NFEM), a window approved for eligible transactions.
The market recorded a slowdown in financial institution activities, with both turnover and deal counts slowing down from previous records.
Data released by the CBN showed that interbank FX turnover fell by 28.4% to $116.413 million on Monday, down from $162.670 million at the previous close.
The US dollar volume was generated across 102 FX deals at the interbank window, down from 127 deals on Friday.
Nigeria’s gross external reserves topped $54.72 billion on sustained FX inflows from multiple sources, including diaspora remittances and crude oil sales.
The strong foreign reserves give market analysts confidence in the authority’s ability to defend the local currency in the event of an external shock.
This view has improved year-end exchange rate projections to N1,300 per dollar amidst growing claims of undervaluation of the sovereign unit.
In the parallel market, the local currency rose by 0.07% to finish at N1,372, reducing the gap between the recognised government FX market and the parallel market to N43 per dollar.
