Naira Trades Healthy at Official Window, FX Reserve Falls

Naira Trades Healthy at Official Window, FX Reserve Falls

The Nigerian local currency, naira, traded healthy at investors and exporters foreign exchange window on Friday after suffering a moderate loss of value. Demand for the United States dollar was moderate, trending behind the total supply of FX in the market

Data from the FMDQ Exchange platform shows that at the investors and exporters foreign exchange market, Naira appreciated by 0.08 per cent as the dollar was quoted at ₦416.00 as against the last close of ₦416.33.

It was noted that most market participants maintained bids at the window between the range of ₦410.00 and ₦444.00 per dollar, according to currencies traders note.

Meanwhile, Nigeria’s foreign currency reserve declined by USD102.94 million to USD40.38 billion on the back of the Central Bank (CBN) continued support of the naira at the official channels.

When compared to the prevailing exchange rate last week, the naira appreciated by 0.1 per cent to N416.00 at investors and exporters FX window. However, the local currency suffered an unofficial depreciation of 0.3 per cent to N573.00 at the parallel market.

In the forwards market, the naira was unchanged at the 1-month contract for N417.07 per dollar, for 3-month months contracts, the local currency was priced at N422.89 to a dollar.

For 6-month contracts, the naira appreciated +0.1 per cent to N431.80 and strengthen against the dollar by +0.6 per cent to N444.24 for 1-year contracts. Nigeria’s still suffering from a dollar inflow shortage as foreign investors stay on the sideline.

Overall, the local financial market appears dry due to lack of foreign investors involvement following the CBN capital control measures targeted at stemming the local currency from free falling.

Expressing a view, Cordros Capital analysts said the CBN has enough supply to support the FX market over the short term, given inflows from the recently issued Eurobond and the IMF’s SDR.

However, analysts said foreign inflows are paramount for sustained FX liquidity over the medium term, in line with the expectation that accretion to the reserves will be weak given that crude oil production levels remain quite low.

Last week, the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate traded within the range of N408-N444.0 per dollar but closed the week at N416.50. Read: Naira Falls as Dollar Volume Traded at Investors Window Slides

In the retail secondary market intervention sales (SMIS) market, the FX spot rate remained unchanged week on week to close at N430.0 to a dollar on Friday amidst the Central Bank intervention.

However, Nigeria’s naira closed at an average of N573 at the parallel market, widening the gap between the NAFEX and parallel market rate to about 40%, which makes the case for currency speculation in the country. #Naira Trades Healthy at Official Window, FX Reserve Falls