Naira Trades Mixed Across FX Markets as Reserve Nears $40bn
The Nigerian local currency, the naira, trades strong at the official foreign exchange (FX) window this week but there were pressures on exchange rates in the parallel market. The local currency has been under pressure in the fx markets recently due to scarcity of foreign currencies.
Weak FX receipts and higher demand for imports have placed the Nigerian economy and exchange rate on its toes, while financial markets remain uncomfortable because of lower foreign investors’ interests.
This week, external reserves remained grew moderately, hovering below $40 billion as the nation’s foreign receipt from oil dwindle because Nigeria is unable to meet 1.8 million barrels per day of the Organisation of Petroleum Exporting Counties (OPEC) quota.
While oil prices have been selling strong and steady at above $100 on average, despite reliance on foreign receipts to drive economic growth, Nigeria’s production was 1.238 million barrels per day in the second quarter of 2022.
Nigeria’s FX reserve inched upward by $10.91 million to $39.44 billion. At the Investors and Exporters window, total turnover as of 21 Jul 2022 increased by 278.7% week to date to $803.75 million, with trades consummated within the N410.00 – 444.00 band.
In the just concluded week, the Naira appreciated by N7.33 against the dollar from last week’s price of N430.33 to close the week at N423 at the Investors and Exporters FX Window due to eased pressure on the dollar, currencies traders said.
According to Cowry Asset, there was a negative reaction to the comments of the CBN Governor during the week which prompted a 6.62% or N41.00 depreciation of the Naira against the greenback at the parallel market to close at N660 from N619 in the prior week.
Analysts said at the Interbank Foreign Exchange market, the exchange rate closed flat at N430.00 per dollar amid Central Bank of Nigeria (CBN) weekly injections of $210 million.
Of the sum injected, $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles.
Meanwhile, the Naira to dollar exchange rate closed in the mixed bag last week for all the foreign exchange forward contracts, according to Cowry Asset Limited. READ: Naira Trades Weak as External Reserve Falls
Specifically, 1-month and 3 months contracts gained 0.01%b and 0.08% respectively to close at N427.40 and N435.50 while the 2 months, 6 months and 12 months contracts dipped by 0.12%, 0.32% and 0.23% week on week in that order to close at N431.62, N448.09, and N471.71/USD in that order.
Market analysts said the local currency to trade relatively calm against the greenback barring market distortions while the CBN continues its weekly FX market interventions. # Naira Trades Mixed Across FX Markets as Reserve Nears $40bn