Naira Trends Vs. Dollar as Companies Scale Back FX Demand
The foreign exchange market value of the Nigerian naira improved in the currency market in the absence of pressures associated with increased demand for dollars. On Tuesday, the local currency extended its gains, buoyed by enhanced dollar liquidity—with the Central Bank of Nigeria (CBN) acting as responsible party driving US dollar volume on the supply side.
The naira recorded positive movement for five straight days, according to CBN data. MarketForces Africa gathered from inside sources that corporate demand for dollars has reduced, while exporter FX inflows remain strong in addition to dollar inflows from international oil companies in May.
“The impacts of naira devaluation on companies earnings have left an indelible mark on their separate financial reports. Business owners with FX liabilities before devaluation have learned their lessons the hard way. Hence, companies have started scaling back on taking foreign currency-priced liabilities while struggling to settle existing ones,” a financial expert from LSintelligence Associates said in a chat.
Some companies have started scaling back on imports and reducing foreign currency liabilities following the country’s naira reform. On Tuesday, transactions in the Nigeria forex market were consummated within the range of N1,577.01 to N1,582.00, as the Naira appreciated by 15 bps to close at N1,579.275.
The spot rate is expected to continue to trade range-bound as the monetary authority continues to boost FX inflows in the market. The nation’s gross external reserves declined to $38.391 billion this week amidst uncertainties around Nigeria’s oil receipts, intermittent remittance and unstable inflows from other relevant sources.
Oil prices rose around 2% on Tuesday to reach a two-week high amid ongoing geopolitical tensions involving Russia, Ukraine, the U.S., and Iran, which are expected to extend sanctions on Russia and Iran.
Brent crude gained $1.11, or 1.7%, to $65.74 a barrel, while U.S. West Texas Intermediate (WTI) crude increased $1.17, or 1.9%, to $63.69. Elsewhere, gold prices dropped 1% after earlier reaching a near four-week high, pressured by a stronger dollar as investors awaited a potential call between U.S. President Donald Trump and China’s Xi Jinping. Spot gold declined to $3,346.96 an ounce.
Analysts hinted that President Trump is likely to speak with Chinese President Xi Jinping this week, shortly after accusing China of breaching an agreement to ease tariffs and trade restrictions. Naira Trends Vs. Dollar as Companies Scale Back FX Demand CBN Cuts Rate on Mid Tenor Bills at Open Market Operations
