Naira Steadies Amidst Plan to Converge FX Rates
Nigeria’s local currency, the Naira, opened the week on a relatively flat note as rates closed at ₦464.5 per United States (U.S.) dollar at Investors’ and Exporters’ foreign exchange window amidst a plan to unify rates.
Bola Tinubu, Nigeria’s new president revealed in its inaugural speech a plan to unify Nigeria’s multi-tiered foreign exchange rates. The move, if implemented, will align with the International Monetary Fund/World Bank asking the monetary authority to adopt a market clearing rate to attract foreign currency inflows into Nigeria.
Broadstreet analysts are of the view that foreign investors’ apathy was triggered by confusing exchange rates and a rising foreign currency backlog for repatriation.
The apex bank launched multiple rates to manage exposures amidst FX scarcity driven by low US dollar inflows. Struggling to strengthen its buffer, the Central Bank of Nigeria (CBN) also initiated capital control to reduce FX outflow which could impact the value of the naira negatively.
In spite of a weak supply side, the apex bank continues to support the naira through secondary market intervention sales. The FX sales record shows the CBN has been returning unsuccessful bids and sometimes delays transactions.
In the parallel market, the naira exchange rate also gained marginally to N756 per US dollar as speculators begin to watch out for possible forex reform in the country.
Data from FMDQ Exchange showed that the local currency appreciated against the dollar on Tuesday, exchanging for N464.50 at the Investors’ and Exporters’ window compared with the N464.51 to the dollar at the close of business on May 26.
The open indicative rate closed at N464.10 to the dollar on Tuesday. An exchange rate of N467 to the dollar was the highest rate recorded within Tuesday’s trading before it settled at N464.50.
The naira sold for as low as 460 to the dollar within the day’s trading. A total of 120.36 million dollars was traded at the official Investors and Exporters window on Tuesday. > Naira Steadies as Banks Issue Update on FX Purchase
In a report by Coronation Research, analysts stated that the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate traded within the range of N410-632 per US dollar but closed at N464.5.
This points toward a depreciation of -0.3% or N1.5 week on week. In the forwards market, FX traded within the range of N449.9-483.2. In the 1-month contract, the naira appreciated by +1.5 to close at N470.8, and in the 3-month contract, FX appreciated by +4.3% to close at N485.8.
In the retail secondary market intervention sales (SMIS) market, the FX spot rate remained unchanged to close at N462 per greenback on Friday. According to data from FMDQ, NAFEX turnover increased by 8.7% to US$702 million on Friday. #Naira Steadies Amidst Plan to Converge FX Rates