Naira Tumbles over Shrinking US Dollar Supply in FX Market
The Nigerian local currency, the naira, depreciated further against the US dollar as a slowdown in FX inflows tightened supply at the official window. The stability the naira had been enjoying was fuelled by the authority FX support and growing investors’ confidence.
The exchange rate trend reflects the underlie strength of the local currency in the absence of FX intervention. Updated daily FX data revealed that the naira dropped to N1448.03 as demand for foreign payments increased, reflecting a year-end spike amidst declining inflows – from N1442.43 per dollar on Friday.
Official FX report released by the authority showed that the spot reached an intraday high of N1450.25 while best transactions were conducted at the intraday low of N1440.
For the past two weeks, the exchange rate has been facing pressures amidst CBN readiness to fund foreign portfolio investors that exited positions in the equities market. Analysts maintained that the local currency will stabilise on hope that the CBN will flood the currency market with US dollar.
The Central Bank of Nigeria (CBN) sold $50 million to support the forex market liquidity last week, and the total injection failed to redirect the official rate.
Inflows into the Nigerian Foreign Exchange Market (NFEM) declined by 25.23% to US$672.30 million, from US$899.20 million in the previous week. FX inflows peaked at $1.37 billion early in November.
The slowdown in US dollar funds reflects aggressive selloffs in naira assets at the fixed income market due to pressures from the new capital gains tax. Foreign investors converted significant amounts from naira to dollar, putting stress on the local currency.
Foreign Portfolio Investors (FPIs) remained the dominant contributors, according to Coronation Research note, accounting for 34.42% or US$231.40 million, of total inflows, followed by Non-Bank Corporates (25.70%), Exporters (22.47%), Individuals (7.56%), and CBN (5.52%), while other sources contributed 4.33%, Coronation said in a report
In the parallel market, the naira exchange rate strengthened by 0.12% to ₦1,470/$, reflecting divergent demand dynamics for the naira. #Naira Tumbles over Shrinking US Dollar Supply in FX Market
Dangote, BUA Drag Total Value of Cement Stocks Down by N1.47trn
