Naira Skids for 5-Day over US Dollar Shortage in FX Market
The naira depreciates for five straight trading session in the forex market over tight FX inflows. According to data from the FMDQ platform, exchange rate depreciated by 0.06% to N1,501.61 per US dollar in the official window on Friday.
Pressures increased despite the fact the Central Bank of Nigeria (CBN) conducted FX intervention, selling $60 million to authorised dealer banks. In the parallel market, the naira exchange rate appreciated by 0.32% to N1,565. The sustained exchange rate appreciation in the informal currency market was driven by increase in FX amount in the supply side.
Bureau de Change (BDCs) operators are currently enjoy access to $25,000 FX sales at official window to keep exchange rate stable. Hence, the Naira ended the day at ₦1,575 per dollar in the parallel market. Also, the FX reserves level declined for the fifth consecutive week by USD269.78 million week on week to USD39.45 billion.
FX Forward Contracts
In the forwards market, the naira rates decreased by 0.1% on the 1-month contract to N1,533.91 while FX forward rate increased across the 3-month contract by +0.8% to N1,592.44. Also 6-month fx forward contract rose +1.6% to N1,678.48 and the 1-year contract appreciated by +3.7% to N1,844.88 per US dollar.
Analysts expect FX market liquidity to remain strong, driven by inflows from foreign portfolio investors (FPIs), supported by attractive carry trade opportunities and a relatively stable naira. However, global uncertainties, including the ripple effects of US trade tariffs, pose a significant risk, Cordros Capital Limited said.
Analysts anticipate that the CBN will maintain its interventions, particularly during periods of liquidity shortages. Elsewhere, oil prices declined after President Trump reaffirmed his intention to increase U.S. oil production, unsettling traders following a significant rise in crude stockpiles.
Brent crude fell 32 cents to $74.29 a barrel, while U.S. West Texas Intermediate dropped 42 cents to $70.61. Gold prices also decreased by 1% as the stronger U.S. dollar and profit-taking following recent record highs influenced the market. Spot gold was down 0.4% to $2,853.16 per ounce, while futures settled 0.6% lower at $2,876.70. #Naira Skids for 5-Day over US Dollar Shortage in FX Market CBN Opens FX Window for BDC to Stock up at NFEM Rate
