Naira Settles at N1435 after 24Hrs FX Sell Down Update
The Nigerian naira settled at N1435.53 following the apex bank notice to deposit money banks to reduce their net foreign currency position to 20%. The Central Bank of Nigeria (CBN) moved to tighten FX regulations having noted sharp practices in some banks during the course of an investigation.
Recently, some analysts have reported that local lenders’ loan appetite has reduced due to economic cracks. FX losses have become a nightmare in the fast-moving consumer sector following the naira devaluation in June 2023.
Some operators have been struggling to survive, and another large daily devaluation happened in the autonomous forex market, pushing the exchange rate near N1500 during the trading session in the week.
MarketForces Africa gathered from investment banking analysts that it is rather too tight to ask big banks to offload FX positions in 24 hours as no holdings are in cash.
“There will be forbearance for some banks, and this will reduce the apex bank policy effectiveness”, analysts told MarketForces Africa while speaking about the timeline for guideline compliance.
Given the tight supply and insignificant positive exchange rate movement, analysts believe Nigerian banks would struggle to comply with the CBN 24-hour foreign asset holdings sell-down.
In the official market, the Naira appreciated by 1.80% day-on-day to close at N1,435.53 per US dollar on Friday, data from the FMDQ platform revealed. In the parallel market, the Naira appreciated by 4.26% to close the trading week at N1,350 per dollar.
Global crude oil price rose in January with benchmark Brent experiencing a 4.4% month-on-month increase to $80.55 per barrel, with ongoing geopolitical tensions being majorly responsible for a surge in oil price.
Afrinvest said traders would remain cautious ahead of the OPEC+ meeting in March, given the US Feds decision to hold rates steady at its recent FOMC meeting.
On the domestic scene, CBN foreign reserves gained 1.5% m/m in January to close at US$33.4 billion. The accretion in reserves might not be unconnected to inflows of about $3.3 billion from the Afrexim bank crude oil-tied support facility, according to analysts. #Naira Settles at N1435 after 24Hrs FX Sell Down Update#
