Naira Slides to N747.87 as FX Inflows Crash

Naira Slides to N747.87 as FX Inflows Crash

The Nigerian naira slid back to N747.87 per United States dollar (USD) on Monday after a report showed that FX inflows into the Investors and Exporters window declined significantly in July, according to data from FMDQ Exchange.

At the official window, the Naira dropped by 1.01 per cent compared to the N740.38 it exchanged for the US dollar on Friday – supported by the Central Bank of Nigeria FX intervention. The open indicative rate closed at N772.06 to the dollar on Monday, according to currency traders.

It was noted that a spot exchange rate of N799.90 to the US dollar was the highest rate recorded within the day’s trading before it settled at N747.87. According to the record, the naira was sold for as low as N730 to the dollar within the day’s trading. Market data showed that a total of 74.64 million dollars was traded at the investors’ and exporters’ window on Monday.

Based on data from FMDQ, total inflows into the official exchange window organised by the Central Bank declined by 65.7% to US$608.00 million in July from USD1.77 billion in June, Cordros Capital said in a report. According to the investment firm, the amount is the lowest seen since April 2021 when total inflows printed at USD564.20 million.

Analysing the breakdown provided, analysts highlight that the decline was on the back of broad-based contraction across both the local and foreign investors. It is noted that at the time, local and foreign accounted for 92.3% of total transaction value, according to analysts.

Precisely, inflows from local investors dipped by 60.6% to USD561.00 million in July from USD1.42 billion in June 2023 given the slowdown across the local segments. The segments that experience a slowdown in inflows into the market include the CBN (-70.0%), Individuals (-51.2%), Non-bank corporates- (-65.6%) and Exporters (-63.9%)

In the same vein, analysts noted that inflows from foreign sources remained underwhelming, declining by 86.5% to USD47.00 million from USD 347.30 million as foreign investors remained cautious about returning in their droves despite the FX market liberalisation, as FX backlogs remain uncleared.

In the parallel market, the Naira closed at an average of N917. Therefore, the gap between the Nigerian Autonomous Foreign Exchange Rate Fixing (NAFEX) and the parallel market rate extended to 23.9%. 

According to data from FMDQ, NAFEX turnover or volume of US dollar transactions increased by 30.6% or USD127.8 million week on week to USD545.9 million on Friday.

Analysts said the NAFEX window recorded an inflow of USD201.8 million with the CBN accounting for 1.5%, foreign portfolio investors accounting for 1.6%, non-bank corporates accounting for 45.9%, exporters accounting for 39.2%, and others accounting for 11.8%.  

“We expect FX liquidity conditions to remain frail in the near term, amid the lingering reforms in the FX market. We also anticipate weak foreign inflows in the short term, as foreign investors will likely adopt a wait-and-see approach in the near term as they await the CBN’s actions in clearing its FX backlogs and the direction of short-term interest rates amid high inflation”, Cordros Capital stated.

Naira Steadies as Banks Issue Update on FX Purchase #Naira Slides to N747.87 as FX Inflows Crash