Naira Tumbles amidst Dollar Scarcity
The Nigerian naira depreciated across foreign exchange (FX) markets amidst foreign currency scarcity in the local economy. The Nigerian naira was exchanged at N451.50 on Friday at the investors’ and exporters’ foreign exchange window due to higher demand for the dollar.
This translates to N5.12 depreciation in a week from N446.50, which is expected to impact payment status for record importation of goods and services by manufacturing and other recognised parties.
Though dollar inflows remained scarce, demand for foreign currency for import payments and other invincible demands by households and corporates continued to increase dramatically.
In the parallel market, the exchange rate dropped marginally to N745 from N743 amidst the release of new naira notes. This keeps FX transactions tight in the space as the deadline for transmitting the old naira notes to banks draws nearer.
FX trading record shows that market participants maintained bids between N442 and N455 at the Investors and Exporters segment while at the open market, bids ranged between N743 and N753.
A look at activities at the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchained from the previous week as it closed the week at N445 from last week, Cowry Asset said in a market note.
Meanwhile, Nigeria’s external reserve was flat, printed at $39.96 billion after a persistent decline. At the official window, the volume of dollars transacted declined by 34.0% to $502.80 million as of Thursday, with trades consummated within the N426.00 – N468.14 band.
In the forwards market, the naira depreciated at the 1-month (-1.1% to N465.10), 3-month (-0.3% to N471.04), 6-month (-2.0% to N499.04), and 1-year (-2.9% to N536.84) contracts.>>> Nigeria to Make Eurobond Call as FX Scarcity Deepens
“For our outlook, we believe the FX liquidity issues will remain over the short-to-medium term in the absence of any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels”, Cordros Capital said in a report.
Analysts said considering the tepid accretion to the reserves given low crude oil production and elevated PMS under-recovery costs, foreign portfolio investors (FPIs) which have historically supported supply levels in the Investors window will be needed to sustain FX liquidity levels in the medium to long-term. #Naira Tumbles amidst Dollar Scarcity
