Naira Somersaults as CBN Makes Zero FX Injection
The Nigerian naira somersaulted and depreciated across the foreign exchange markets as the level of the US dollar eclipsed the supply side. Both the official and black market rates have worsened with the FX spread trending above 40%.
The exchange rate has worsened by N100 in days due to sustained scarcity of foreign currency amidst rising demand for import payments. Data obtained from the FMDQ platform showed that the Naira depreciated by 5.99% at the official market, closing at N931.23 from N878.57 from the previous day.
Several investment banking firms have turned to naira bears as a result of weak expectations that the exchange rate will improve significantly in 2024, according to their separate market outlook for the year.
The local currency has been weakening following 14- weeks of no forex market intervention by the Central Bank of Nigeria (CBN). With a large demand record in the parallel market, the exchange rate has continued to depreciate.
According to channel check, the Naira traded weak on Wednesday at parallel, closing at N1,323 against the US dollar. In the global commodity market, West Texas Intermediate (WTI) crude futures declined by 1.98% to $70.97 per barrel on Wednesday. Also, the Brent Crude declined by 1.51% to close at $77.11 per barrel.
Recent data showed that capital importation into Nigeria fell to a record low in Q3-2023, declining by 43.6% year on year to USD654.65 million.
According to analysts, a persistent slowdown in capital importation reflects foreign investors’ lacklustre interest in the country given the lingering FX liquidity constraints, uncompetitive domestic interest rates and the uninspiring macro narrative.
Details showed that in the period, foreign portfolio investments sank by more than 80% to USD87.11 million, foreign direct investments slumped by 26.9% to USD59.77 million, and other investments plunged 20.2% to USD507.77 million year on year.
Broadstreet analysts said they anticipate foreign inflows to remain subdued compared to pre-COVID levels due to foreign investors adopting a cautious “wait-and-see” approach. #Naira Somersaults as CBN Makes Zero FX Injection Nigeria Eurobond Slumps after CBN Resumes OMO Auction
