Naira Trades at N416.50 as CBN Caps FX Spending Limit
Naira appreciates 0.04 per cent to N416.50 on Friday at investors and exporters’ foreign exchange (FX) window as the Central Bank of Nigeria (CBN) initiate fresh foreign currencies spending controls.
In the week, some deposit money banks informed about monthly dollar allocations for customers has been reduced by 80% from $100 to $20 – mostly used by individuals that want to buy from online.
Banks told customers via emails that the directive will be implemented from 14 of May 2022, thus additional demand for the dollar has to be met elsewhere – notably at the parallel market.
CBN targets $200 billion FX earnings to drive external reserve upward and keep the local currency strong despite the twin evil of excessive dependence on hydrocarbon FX receipts and high imports bills.
With oil price making an uptrend, Nigeria has seen no effect on the external reserves at a time when foreign investors’ participation in the local economy remains relatively low.
This week, Nigeria’s foreign reserves position reversed last week’s accretion as it declined by $102.51 million week on week to $39.77 billion amidst hefty priced Qua Iboe, Nigeria’s top, less sulphuric crude oil.
At the Investors and Exporters FX window, total turnover declined marginally by 0.4% $550.64 million on Thursday, with trades consummated within the N410.00 – N453.15/$ band.
However, Naira lost against the greenback at the Parallel market by 0.55% to close at N581.17 per dollar on Friday. At the Interbank Foreign Exchange market, the exchange rate closed flat at N430.00 to a dollar amid CBN’s weekly injections of $210 million.
Of the sum injected into the market, $100 million was allocated to Wholesale Secondary Market Intervention Sales, $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles.
Meanwhile, traders said the foreign exchange rate went in mixed directions across the foreign exchange forward contracts. Specifically, 1 month and 3 months contracts lost 0.05% and 0.04% to close at N418.50 per dollar and N424.52 to a greenback respectively.
However, 6 months and 12 months contracts gained 0.03% and 0.11% to close at N433.31 and N448.86 respectively while 2 months contract was flat at N421.35.
“We expect renewed pressure at the I&E Window as the markets react to strain in forex supply despite higher crude oil prices at the international market as Nigeria’s crude oil output remains low”, Cowry Asset Management said in a note. #Naira Trades at N416.50 as CBN Caps FX Spends Limit