The naira appreciates at the beginning of the week with increase in foreign exchange (FX) inflows, thus reducing demand pressure at the Investors and Exporters window.
The battle to save the naira has been ongoing, and the latest move to redesign some notes is expected stem the local currency from its persistent depreciation, according to foreign currency analysts.
Weak local currency, coupled with a rising inflation rate has weakened purchasing power of the naira, affecting both corporate and individual finances. At the investors’ and exporters’ FX market, the Naira gained 0.37 per cent against the US dollar, rising to N444.7 from N446.33.
According to Market Forces, Africa, the parallel market rate, however, remained constant at N775 ahead of the 2023 election. Consequently, the gap between the official and black market rates is collapsing fast after spurious demand pushed the exchange rate curve higher in recent weeks.
Lower foreign currency inflows remain top issues combating naira stability but it is unlikely to go away on account of the import-dependency of Africa’s largest economy by gross domestic product size.
Despite higher global oil prices, Nigeria has failed to position itself strongly as exporting country due to a bottleneck in crude production; including oil theft among others.
Higher oil prices at the global level are fast reducing due to changing dynamics and instability in major economies – due to partial economic lockdown in China and Russia-Ukraine war.
On Monday, Brent crude price dipped 3.06 per cent to $81.07 a barrel. Meanwhile, WTI crude oil fell 2.59 per cent to $74.30 per barrel as a result of widespread street protests in China over the country’s strict COVID-19 policy.
The United States granted Chevron Corp a license to produce oil in Venezuela, dampening investors’ expectations for increased energy demand in the near future. FX market data show that the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) rate traded within the range of N431.0-447.5 but closed at N446.33 last week.
This translates to a depreciation of -0.1% or N0.7 week on week. In the forwards market, the naira traded within the range of N447.0-465.8 per greenback in the foreign exchange market.
In the retail secondary market intervention sales (SMIS) market, the FX spot rate remained unchanged to close at N445 per dollar on Friday. As the naira holds strong across markets, the gap between the NAFEX and the parallel market rate has collapsed near 70 per cent.
According to data from FMDQ, NAFEX turnover increased by 20.5weeks $118.9 million on Friday, Coronation Research said in a market note.
Last week, analysts said the NAFEX window recorded an inflow of $126 million with the Central Bank of Nigeria accounting for 6.4 per cent, foreign portfolios investors (FPIs) accounting for 1.1 per cent, non-bank corporates accounting for 35.7 per cent, exporters accounting for 47.8 per cent, and others accounting for 9.0 per cent, according to a market report.
Meanwhile, the naira appreciated against the Chinese Yuan (CNY), according to data from the CBN, up +0.2 per cent to close at N62.2.