Naira Trades at N446, Exchange Rates Gap Reduces
The Nigerian Naira traded at N446 at the Investors’ and Exporters’ foreign exchange (FX) window on Monday over demand pressures resulting from higher demand for the United States dollar for payments.
Meanwhile, as spurious demand drop in the black market, Naira continues to trade stronger against the greenback. The exchange rate in the parallel market declined to N660 to the US dollar. The Nigerian naira is expected to weaken further over a lack of productive capacity to generate dollars other than from oil exports.
Unfortunately, the government is not doing well with crude oil production with a higher level of oil theft record and outdated crude production infrastructure.
MarketForces Africa reported that the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) market recorded higher foreign currency inflows week on week. In spite of an increase in dollar inflows, demand pressures persisted as the local currency exchange rate breaks out of the N445 level.
Trading data show that the NAFEX rate traded within the range of N415.0-461.0 per US dollar but closed at N445.8. This points towards a depreciation of -0.1% or N0.3. In the forwards market, FX traded within the range of N443.0-447.7.
In the 1-month contract, FX depreciated by 0.5% week on week to close at N451.1 and in the 3-month contract, the naira depreciated by 0.5% to close at N460.7 on Friday. In the retail secondary market intervention sales (SMIS) market, the FX spot rate remained unchanged, closing at N445.
At the current rate across FX markets, the gap between the NAFEX and parallel market rate has now dropped below 50%, from nearly 100% after the naira redesign announcement. Data from the FMDQ Exchange showed that NAFEX turnover increased by 171% or $161.1 million to $255.2 million.
The NAFEX window recorded an inflow of $127 million with the CBN accounting for 6.5%, FPIs accounting for 17.0%, non-bank corporates accounting for 30.4%, exporters accounting for 39.2% and others accounting for 6.9%, Coronation Research said in a report.
Also, the naira depreciated against the Chinese Yuan by -1.9% to close at N62.1. Meanwhile, the nation’s external reserves decline further as crude oil prices declined, closing at $37 billion, according to data from the CBN website.
Brent crude was down 1.26% to $94.78 a barrel on Monday while WTI crude oil followed the same line, declining by 1.74% to $87.41 per barrel. READ: Low FCY Exposure Reduces Nigeria’s Debt Distress Risk
Elsewhere, OPEC revised each of its 2022 and 2023 oil demand growth forecasts by 100,000 barrels per day (bpd) from last month’s estimates due to China’s still-strict Covid policy and economic challenges in Europe.