Naira Sinks across Fx Markets in Absence of CBN Intervention
The naira, Nigeria’s local currency, fell further against the dominant US dollar across foreign exchange markets in the absence of sufficient forex market intervention.
Both official and parallel market exchange rates suffered setbacks as liquidity shortfalls boosted volatility. According to spot data from the FMDQ platform, the naira settled at N1,687.52 per US dollar at the official market.
The current spot rate represents a 0.51 percent loss when compared to the previous trading date on Tuesday, when it exchanged at N1,678.93 to a dollar.
However, the total daily turnover increased to 173.29 million dollars on Wednesday, up from 128.59 million dollars recorded on Tuesday. At the Investor’s and Exporter’s (I&E) window, the naira traded between N1,705 and N1,601.50 against the dollar.
The exchange rate movement at the Nigerian autonomous foreign exchange market has been unstable, and most of US dollar sales by the Central Bank (CBN) have had low effects
To strengthen the naira after a huge devaluation last year, the CBN has tried putting in place models, which appear to be unsuccessful. Still, the naira has not crawled back to N1000-N1200 initially projected by Goldman Sachs or N1450 estimated by Fitch Ratings.
The spot rate remains at a significant distance from Financial Derivative Company’s fair value projection for the year and another bullish expectation from Renaissance Capital.
To keep the naira stable in the official window, some analysts have voiced their views that there is an apparent need to support the local currency by selling US dollars to banks.
“The naira cannot survive willing buyers and willing sellers without running amok due to limited FX inflows into the official market,” analysts said in a chat room with MarketForces Africa.
In the parallel market, the naira closed N1,740 to the greenback as seasonal demand picked up, creating a demand-supply imbalance. While the naira continues to suffer from FX liquidity challenge, the CBN’s gross external reserves balance maintains an uptrend, reaching $40.288 billion.
Elsewhere, oil prices remained largely unchanged as worries about increasing hostilities in the Ukraine conflict potentially affecting oil supplies from Russia countered the reports of rising U.S. crude inventories.
Brent crude price held steady at $73.71 per barrel, while WTI settled at $69.95 per barrel. Gold prices rose for the third consecutive day, reaching a one-week high as investors turned to the safe-haven asset in response to growing geopolitical anxieties driven by escalating tensions between Russia and Ukraine.
The price of gold settled around $2,646.79 per ounce in the global commodities market on Wednesday. #Naira Sinks across Fx Markets in Absence of CBN Intervention Money Market Rates Mixed as Banking System Deficit Reduces
