Naira Settles at N1540 as CBN Sells $124m to Boost FX
In the Nigerian autonomous foreign exchange market, the naira ended the week stronger versus the US dollar due to an improvement in liquidity. The local currency appreciated week on week as FX inflows remained sufficient to douse demand pressures.
According to data from the FMDQ platform, the naira appreciated by 0.32%, closing at N1,540.00 per US dollar in the official market. The naira traded within a tight range against the US dollar throughout the week, supported by dollar sales from exporters and improved liquidity.
Fluctuations were observed in the Nigerian Foreign Exchange Market (NFEM), with trades ranging between N1,500.00 and N1,560.00 per greenback, according to AIICO Capital Limited.
FX transactions were settled between N1,520.00 and N1,549 in the forex markets. On weekly comparison, the local currency appreciated by 2.2% following the Central Bank of Nigeria’s (CBN) dollar sales to authorised banks.
The CBN intervened in the forex market by selling USD 124.60 million to authorised dealers this week with the aim to keep the naira stable with a strong level of foreign currency liquidity.
Giving additional hope about sustained market support for the local currency, data from the CBN revealed that foreign reserves grew by USD210.73 million to USD40.53 billion due to improved FX inflows boosted by elevated market confidence.
Total turnover in the official window decreased by 70.5% to USD619.61 million on Thursday, with trades consummated within the N1, 591.60 and N1,700.00 per US dollar band.
In the forwards market, the naira rates increased across one, three, six and one-year contracts. FX forward contract for 1-month gained 2.5% to N1,580.29, 3-month forward contract appreciated by +4.4% to N1,639.10 per US dollar.
Also, the 6-month forward contract rose by +3.6% to N1,726.75 while the 1-year contract gained +5.0% to N1,900.89 per US dollar. Also in the parallel market, the exchange rate ended the day at N1,635 per US dollar
“We note the slowdown in FPI inflows, which has further constrained overall FX liquidity despite the CBN’s moderate interventions. While we expect the CBN to maintain the tepid FX intervention, we think the naira will remain under pressure in the short term if FPI inflows do not improve substantially, Cordros Capital Limited said.
Elsewhere, oil prices edged up, aiming for their first weekly increase since late November due to heightened supply concerns from new sanctions on Iran and Russia, despite a surplus outlook impacting the market. Brent crude stood at about $73.92 per barrel, while WTI was around $70.64.
In the commodity market, the price of gold declined but was still poised to conclude the week on a high note as focus shifted to the U.S. Federal Reserve’s December meeting, where a third interest rate cut for the year is anticipated. Gold was priced at about $2,671.39 per ounce.
