Naira Strong Rally Widens Exchange Rates Gap to N123
The naira soared by about 5% against the US dollar in the foreign exchange market due to lower pressure on FX liquidity. According to spot data from the FMDQ platform, the local currency gained 4.49%, closing at N1,561.76 per US dollar at the official market.
The rally, which happened to be one sided between the official and parallel markets, caused FX spread to spike strongly. A channel check showed that the naira closed at ₦1,684 per US dollar in the parallel market.
At the current trading spot rates, exchange rate gap widened to N123, creating incentives for speculative bets. In September 2024, the Nigerian autonomous foreign exchange (NAFEM) market experienced heightened volatility due to limited foreign exchange supply and strong corporate demand.
Exchange rates fluctuated between N1,500 and N1,699, AIICO Capital Limited said in a report. The Central Bank of Nigeria (CBN) intervened several times, injecting an estimated $544 million, which helped stabilize rates.
Thus, the Naira appreciated by 3.54% month on month, with the NAFEX fixing rate closing at $/₦1,541.94, with improved dollar liquidity in the market. FX turnover was 17.34% above August record, reflecting a monthly increase of $706.16 million, the investment firm stated.
However, the parallel market saw a 4.01% month on month depreciation, according to AIICO Capital Limited, with rates closing at $/₦1,687.50. On a positive note, Nigeria’s gross foreign exchange reserves grew by 5.64%, adding $2.05 billion to reach $38.35 billion in Sept,
Overall, the market remained pressured, but liquidity showed signs of recovery. Keeping interest rate high is part of the CBN’s efforts to manage exchange rate volatility as the fiscal side continue borrowing spree, analysts said.
Elsewhere, Oil dropped by over 4%, pausing the rally driven by increased geopolitical risk as the market awaited Israel’s response to Iran.
Brent prices fell by 4.03% to $77.67, while WTI prices decreased by 3.99% to $74.06. #Naira Strong Rally Widens Exchange Rates Gap to N123 CBN Defends Naira with $39m in Forex Market
