Naira Sinks by 4.1% over US Dollar Shortage in FX Market
The naira lost value across the foreign exchange (FX) markets due to a weak supply of the US dollar. The exchange rates swung negative as a result of FX shortage challenges in the economy.
Spot data obtained from the FMDQ platform confirmed that the naira depreciated by 4.06%, closing at ₦1,625.13 per US dollar. In the parallel market, the naira closed at ₦1,670 to the US dollar over sizeable FX demand for invisible payment.
The total daily turnover reduced to 170.6 million dollars on Wednesday, down from 253.68 million dollars recorded on Tuesday.
“The exchange rate direction depends solely on the amount of forex in the market versus the amount that FX users are requesting to meet US dollar denominated liability or payment,” analysts said at MarketForces Africa’s meeting.
The challenge of foreign currency scarcity has failed to fizzle out even with improvement seen in Nigeria’s oil production output. Despite uncertainties in the global commodities market, price of crude oil has not fallen below $60 per barrels but has inched near $90.
Latest data from the commodities market showed that oil prices decreased today after a significant drop in the previous session. Brent dipped to $76.57, while US benchmark WTI fell to $73.27 per barrel.
But data from the Central Bank of Nigeria (CBN) revealed that the external reserves continue its uptrend. The gross balance climbed to $38.670 billion on Tuesday due to twice inflows seen since last week.
On Friday, Nigerian autonomous foreign exchange market (NAFEM) rate traded within the range of N1,530- N1,699, closing at N1,631.2/US$ in the spot market. According to Coronation Research, the exchange rate movement points towards a depreciation of 5.9% or N90.4 week on week.
Analysts at Coronation Research explained that channel checks conducted revealed that in the parallel market, the Naira closed at an average of N1,688/US$ on Friday – leaving FX gap at 2.4%.
According to data from FMDQ, total NAFEM turnover increased by 10.6% or US$138 million week on week to close at US$1.4 billion. The official FX window recorded an inflow of USD645 million.
The CBN accounted for 23.3% of the total inflow, foreign portfolio investors (FPIs) contributed 14.2% while non-bank corporates supplied 20%. Also, exporters accounted for 28.7% of the inflows, and others accounted for 13.9%.
Additionally, gold prices retreated due to the strengthening dollar and reduced expectations for a more significant rate cut in November. #Naira Sinks by 4.1% over US Dollar Shortage in FX Market Julius Berger, United Capital Drive Intraday Gain on NGX
