Naira Softens on Tight FX Liquidity, External Reserves Fall
The naira softened slightly against the US dollar at the Nigerian foreign exchange market (NFEM), where the local currency closed at N1366.7278 on Thursday.
The local unit experienced a few basis point decline versus the greenback amidst a sharp decline in oil prices in the global commodity market.
FX liquidity was robust but insufficient to meet demand for US dollars bid by financial institutions on behalf of various customers, leading to a mild decline in the spot rate value.
International payments and related transactions conducted during the trading session were consummated between N1365 and N1370 per dollar, according to daily FX data obtained by MarketForces Africa.
The intraday spot rates suggest the US dollar liquidity remained under pressure even with recent FX inflows from foreign portfolio investors that participated in the Central Bank OMO auctions.
Last week, the CBN was the sole driver of total FX inflows worth over $1 billion, accounting for about 50% of the sum following FX intervention or US dollar sales to banks.
Today, the interbank FX turnover fell below the previous day’s record, settling at $58.423 million. This represents more than a 4.2% decline from $61.034 million reported the previous day.
Also, the number of deals executed by financial institutions acting as market makers at the NFEM window fell by 71, from 86 previously recorded. The latest update from the CBN showed that Nigeria’s foreign reserves declined further, settling at $51.922 billion from $51.938 billion the previous day,
Oil prices dropped during Thursday’s trading as investors reassessed geopolitical risks in the Middle East, after indications of ongoing negotiations aimed at de-escalating tensions bolstered expectations for stable crude supplies, coinciding with signs of improvement in supply from several key sources.
Brent crude contracts fell by 1.2% to trade near $87.05 per barrel, while West Texas Intermediate crude decreased by 0.55% to around $84.85 per barrel, amid a decline in the risk premium that had supported prices in recent times. US Equities Sold Off, European Markets Diverge as Sentiment Shifts
