Naira Strengthens over Fresh Confidence in FX Markets
The Nigerian naira moved with confidence as the dominant US dollar across foreign exchange markets as foreign currency availability exceeded aggregate demand requested by FX users at the autonomous or official market.
In the parallel market, the spot FX rate recouped losses as total demand undercut market supply amidst a plan by the Central Bank of Nigeria (CBN) to sell US dollars to the Bureau de Change to instill sanity in the space.
According to information obtained from the FMDQ platform, the naira appreciated by 4.35%, closing at ₦1,492.61 per US dollar at the official market. In the parallel market, the naira closed at ₦1,435 to the US dollar, according to a channel check.
Based on channel checks conducted by MarketForces Africa, this medium can authoritatively report that the exchange rate at the parallel market did not appreciate to N1400, as against claims by some media outlets.
The CBN has cleared its legacy FX backlog owed to banks as the apex bank seeks to restore confidence in the forex market. In a statement released, the authority announced that the remaining $1.5 billion has been paid to banks. This brings total FX backlog payment to $7 billion.
The payment is expected to restore foreign investors’ confidence in the Nigerian economy as the CBN continues to implement reforms in order to attract foreign currency inflows.
Fitch Ratings said in a report that it will take time for foreign investors to trust Nigeria’s FX market even if the apex bank clears all FX forward obligations.
The CBN is using high interest rates on government borrowing instruments to attract hot money into the economy. This, plus accretion into foreign reserves, raised a buffer to support the naira. Recent developments indicate that the apex bank has halted FX market intervention again.
Information from the CBN website showed that gross external reserves maintained an uptrend, trending above $34 billion on a better oil economy – increased price and volume have raised inflows into the country.
In the global commodity market, the cost of oil experienced a downturn, with Brent crude decreasing by 1.82% to reach $85.79 per barrel, and WTI crude similarly dropping by 1.99%, settling at $81.08 per barrel. #Naira Strengthens over Fresh Confidence in FX Markets
