Naira Sinks to N1652, Exchange Rates Gap Hits N98
Despite the intervention of the monetary authority, the exchange rates of the Nigerian local currency, the naira, did not improve on any of the currency markets. Instead, the gap between official and parallel market exchange rates widened to N98 due to a lack of support in the informal currency space.
Analysts told MarketForces Africa that the exchange rate trend has raised speculative concern as the authority continues to struggle to unify rates. The market showed good liquidity last week as the Central Bank of Nigeria (CBN) sold about $55 million to authorised dealer banks, AIICO Capital Limited said in a note.
Analysts said persistent demand for foreign exchange kept the market competitive, leading suppliers to seek higher selling prices. Consequently, the naira slightly depreciated by 2 bps against the USD, closing at N1,652.62 per US dollar at the official window.
FX sales to banks have slowed down as the authority plans to roll out an automated FX platform in Dec. 2024. The less than expected FX auctions have near-zero negative impacts on external reserves.
Nigeria’s foreign reserves has continued to uptrend as the market anticipates a detailed plan of $2.2 billion in approved external borrowing. Details from the CBN showed that FX reserves maintained their growth trajectory, as the gross reserve level grew marginally by USD 2.24 million week on week to USD 40.28 billion.
Over the past 6 weeks, the external reserves has seen an average weekly addition of USD 257.91 million. Total turnover at the NAFEM decreased by 68.1% to USD518.32 million on Thursday, with trades consummated within the N1,601.50–N1,705.00 range.
In the forwards market, the naira rates decreased across the 1-month, 3-month, 6-month, and 1-year contracts, Cordros Capital Limited said in a note. Further details showed that the forward contract for one month depreciated by 0.2% to N1741.12 per US dollar, while the three-month FX forward contract dipped by 0.3% to N1817.47.
Six-month FX forward contract plunged by 0.2% to N1927.93 per US dollar, while one-year contract depreciated by 3.7% to N2158.28. Over a week, the naira has lost N0.37 and N15.00 to close at N1652.62 and N1,750.00 in the official and parallel markets, respectively.
Consequently, the spread between the two markets widened to 5.89% from 5.01% the previous week, TrustBanc Financial Group said in a note.
Elsewhere, oil prices edged higher in the global commodity with a 5% increase for the week due to the escalation of the Ukraine conflict and anticipated higher Chinese imports in November. ICE Brent crude increased to $74.94 per barrel, while WTI is approximately $70.98.
Similarly, gold prices exceeded the $2,700 mark for the first time in a fortnight, poised for their most significant weekly increase in over a year as safe-haven demand surpassed dollar strength and lowered expectations for a U.S. rate cut next month.
At present, gold is trading at about $2,707.40 per ounce. #Naira Sinks to N1652, Exchange Rates Gap Hits N98 Naira Plunges on Suboptimal FX Intervention
