Naira Sinks, CBN Double Down Forex Market Interventions
The naira lost against the US dollar in the Nigerian Foreign Exchange Market (NFEM) despite increased FX interventions by the monetary authority to stabilise the rate. The Central Bank of Nigeria (CBN) doubled down FX market interventions, starting from the beginning of the week to Thursday. The move was in continuation of an effort that started the previous week to ensure that the exchange rate at year meet target.
Previous week, the CBN defended the naira three times in the FX market, selling about $125 million to authorised dealer banks at lower rates. Due to this flood of US dollar sales to banks, the market witnessed heightened activity and improved liquidity throughout the week.
As market conditions remained active, exchange rates fluctuated within the N1,510–N1,565 range. According to AIICO Capital Limited, midweek saw notable stability, with trades narrowing to N1,531.00–N1,550.00 levels. By the end of the week, the naira depreciated marginally by 13 basis points week on week to close at N1,542.00 per US dollar.
In the parallel market, the exchange rate plunged as demand pressure was witnessed in the informal currency market for invisible payments. Pressure mounted despite the latest direction that allows Bureau de Change operators to access $25,000 from local banks at the official rate with a 1% cap on FX spread.
The CBN intervened for the fourth consecutive session, selling $46 million between the rates of N1,531 and N1,542. The Apex Bank defended the local currency all through the week except on Friday, bringing total FX sales for the week to $197.7 million.
Nigeria’s foreign reserves recorded additional US dollars inflows this week, as the gross reserves level grew by US$226.47 million to USD40.79 billion. The naira traded mixed in the forwards market across contracts. The naira rate for 1-month contract depreciated by 0.1% to N1,581.39 per US dollar
FX forward 3-month contract appreciated by +0.0% to N1,638.84 per greenback, and 6-month contract gained +0.4% to N1,720.67. Also, 1-year FX forward contract popped by +0.3% to N1,895.16. Elsewhere, Oil prices remained relatively stable at their close as markets assessed Chinese demand and U.S. Fed interest rates cut.
Brent crude was approximately $72.94 per barrel, while WTI hovered around $69.46. At the same time, gold prices continued to rise on the final day of the week, buoyed by a weaker dollar and falling Treasury yields after U.S. economic reports. Gold was valued at about $2,623.36 per ounce. #Naira Sinks, CBN Double Down Forex Market Interventions# CBN Opens FX Window for BDC to Stock up at NFEM Rate
