Naira Strengthens to N1,540 as Huge FX Auction Eased Volatility
The naira exchange rate strengthened to N1,540 against the US dollar in the foreign currency market following huge FX intervention. Exchange rates had worsened due to delayed FX sales to ease liquidity pressure.
In its latest market action, the Central Bank of Nigeria (CBN) as part of efforts to boost foreign currency liquidity sold US dollar to Bureau de Change (BDC) operators and local deposit money banks.
In a latest notice, the apex bank sold $20,000 to BDCs operators to reduce demand pressure in the informal segment. The CBN also conduct FX auction where it sold USD89 million to authorised dealers banks in the currency market, according to Cordros Capital Limited.
These actions caused the naira to appreciate, settling at N1,540.78 per US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM).
Meanwhile, activity level in the NAFEM Window improved by 45.8% from beginning of the week to $1.1 trillion on Thursday, said Afrinvest Capital Limited. Analysts said they expect the Naira to sustain a positive trend in the absence of any negative market triggers.
In the forward market, one month contract depreciated by 2.7% to N1684.53 while three months forward contract fell by 2.6% to N1,721.12. FX forward contract for six month depreciated by 2% to N1,849.07 while one year contract dipped by 1.5% to N2.951.10 to a dollar.
The Naira depreciated 1.8% against the US dollar to ₦1,675.00 in the parallel market on Friday. Despite the CBN’s market interventions, analysts anticipate persistent FX demand pressure in the near term, partly due to seasonal factors. This is likely to underpin the volatility in the naira in the short term.
MarketForces Africa reported that Nigeria’s gross external reserves increased to about $37.869 billion amidst sustained foreign currency inflows into the economy, data from the CBN.
The balanced in external reserves increased for the fourth consecutive time this week, as the gross reserve level grew by US$397 billion from $37.471 billion last week Friday.
Based on the latest trajectory, Nigeria’s foreign reserves could cross $38 billion in the next few weeks, analysts projected, despite pressure on crude oil prices in the global commodities market.
Oil prices experienced a weekly decline due to the possibility of increased oil supplies from Saudi Arabia, which outweighed China’s efforts to boost its economy.
As of the latest report, Brent oil dropped by 3.11% to $72.34 per barrel for the week, while US benchmark West Texas Intermediate (WTI) decreased by 5.25% to $68.55 per barrel. #Naira Strengthens to N1,540 as Huge FX Auction Eased Volatility CBN Defends Naira with $39m in Forex Market
