Nigerian Naira Big Daily Loss Reduces FX Gap
The financial markets players and FX traders have bided the Nigerian a long goodbye as the official exchange rate worsened to N956 to a US dollar, data quoted by the FMDQ platform showed. New trading data showed that the local currency has crossed a new red line against the dominant US dollar.
However, it appears exchange rate convergence could be achieved as worsening official rate is getting closer to parallel market – signifying that June devaluation was not done properly as the market begins to find a new equilibrium.
Data suggests that a strong FX spread enjoyed by speculators reduced significantly as parallel and official market rates got closer due to demand and supply imbalance at the official window.
Data from FMDQ showed that the naira depreciated by 13.78% to N956.33 per US dollar at the Nigerian Autonomous Foreign Exchange Market (NAFEM). Nigeria’s forex markets have been flying blind with an acute shortage of US dollars and other foreign currency.
In the parallel market, the Naira’s performance remained subdued, depreciating by 0.17% day-on-day to close at N1,152 per dollar. Exchange rates worsened as heightened demand for the greenback overwhelmed FX supply.
However, the gap between exchange rates collapsed below N200. Data from the Central Bank of Nigeria showed that external reserves remained tight at around $33.4 billion. A recent report showed that Nigeria’s oil production has increased, while global market price remained ahead of the budget benchmark.
Oil prices have come under pressure recently. Brent Crude traded at $80.44 per barrel and WTI at $75.53 per barrel. This decline was influenced by OPEC+ delaying its meeting and a notable build in U.S. crude stocks according to the latest EIA oil inventory report. Reps To Investigate N200bn Expenditure On Postponed 2023 Census