Naira Strengthens Against Dollar, Chinese Yuan
Naira gains 0.04 per cent to N64.3 to a Chinese Yuan week on week, according to Coronation Merchant Bank Limited macroeconomic note obtained by MarketForces Africa on Monday as external reserves hit $41.828 billion.
Also, the Nigerian local currency traded comeback in the investors and exporters foreign exchange window against the United States dollar, data from FMDQ Exchange shows.
According to FX data, the naira gained 0.03 per cent against the greenback as transactions were consummated at N414.98 at the Nigerian autonomous foreign exchange rate fixing on Monday amidst rising foreign external reserves.
Nigeria’s gross external reserves moved near $42 billion as some analysts are predicting further accretion due to stable oil prices in the international market and a positive demand outlook for crude despite the energy crisis.
Recall that last week, the NAFEX rate depreciated by 0.01 per cent or N0.03 week on week to N415.10 for a United States dollar.
In the forwards market, the rate depreciated at the 1-month contract by 0.18 per cent week on week to N416.67 per dollar and at the 3-month contract dropped off 0.80 per cent to N424.47.
“Based on our channel checks, we note that in the parallel market, the Naira closed at an average of N568.0 for a dollar on Friday”, Chinwe Egwim, Coronation Merchant Bank Chief Economist said in a note on Monday.
Therefore, the Coronation Chief Economist explained that the gap between the NAFEX and parallel market rate now stands at 37 per cent.
Citing data from the FMDQ Exchange platform, NAFEX turnover showed a week on week decrease from USD240.9 million to USD93.7 million on Friday.
There has been a slowdown in the Central bank intervention in recent times. FMDQ data shows that over the past week the Investors and Exporters foreign exchange window (NAFEX) recorded inflows of USD411 million.
Of the total sum, Coronation hinted that the CBN accounted for 34.7 per cent, foreign portfolio investors (FPIs) 18.4 per cent, non-bank corporates accounted for 28.0 per cent, and others contributed 19.0 per cent.
“We maintain our view that the FGN’s recent USD4 billion Eurobond issuance and the allocation from the International Monetary Fund’s (IMF) Special Drawing Right (USD3.4bn) bode well for foreign currency reserves”.
Coronation revealed an expectation that the NAFEX rate will trade range-bound between N410.00– N420.00 to a dollar in the near term. Turning to the Chinese Yuan (CNY), according to data from the CBN the Naira appreciated by 0.04 per cent week on week to N64.3 per Yuan, Coronation Chief Economist note stated.
Recall the Bilateral Currency Swap (BCS) agreement entered in 2018 between Nigeria and China allowing the two countries to swap a total of CNY15 billion for N720 billion or vice-versa was renewed in 2021.
CBN has continued with the fortnightly Chinese Yuan auctions. However, analysts noted that some Chinese suppliers still prefer issuing invoices in dollars as opposed to Yuan. #Naira Strengthens Against Dollar, Chinese Yuan
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