THE naira, Nigeria’s indigenous currency, fell throughout foreign exchange (FX) markets as political and economic uncertainty in Africa’s largest country matured ahead of the 2023 election.
Apart from the demand issue, the external buffer for backing the local currency decreased last week as the central bank depleted the country’s foreign currency holdings.
Experts disclosed that rising import expenses and low accretion from oil sales are the main downside threats to a healthy naira.
Demand for the dollar and other foreign currencies is increasing pressure on FX markets ahead of the country’s primary elections, indicating a grim picture for the local currency.
Nigeria’s external reserves also fell by $234.81 million to $39.07 billion last week, according to analysts’ notes, due to a lack of dollars in the economy and market intervention by the Central Bank of Nigeria.
Normalcy has yet to return to the FX markets as concerns about CBN Governor Godwin Emefiele’s participation in partisan politics fade.
According to Cordros Capital, the Nigerian naira declined by 0.5 percent and 1.7 percent at the Investors and Exporters FX window and parallel market, respectively, to N419.00 and N599.00 per US dollar.
The turnover or amount of dollars transacted in the Investors and Exporters FX window Cordros Capital revealed, surged by 60.2 percent to $575.81 million on Thursday, while deals were completed within the N410.84 – N453.25/$ band.
Trading data from the FMDQ, also disclosed that the Naira rebounded on Friday after a two-day hiatus, gaining 0.24 percent or N1 against the greenback in the Investors and Exporters segments.
On Friday, the open indicative rate was N417.70 to the dollar while the highest rate reported during the day’s trade was N444.00 to the dollar, before the rate settled at N419. During the day’s trade, the Naira fell as low as 412 to the dollar.
The official Investors and Exporters window same Friday, traded a total of 169.38 million dollars in foreign exchange.
Cowry Asset Management market report revealed that the naira exchange rate finished steady at N430.00 to the dollar on the Interbank Foreign Exchange market, despite the CBN’s weekly injections of $210 million.
Of the total, Wholesale Secondary Market Intervention Sales (SMIS) received $100 million, Small and Medium Scale Enterprises received $55 million, and Invisibles received $55 million.
Meanwhile, the Naira for dollar exchange rate fluctuated across foreign exchange forward contracts, according to independent reports from FX traders.
The two-month, three-month, and 12-month contracts gained 0.05 percent, 0.05 percent, and 0.18 percent, respectively, to close at N420.92/$, N423.80/$, and N448.02/$. The 1 month and 6 month contracts, however, lost 00.11 percent and 0.01 percent, respectively, to settle at N418.46/$ and N432.66/$.
The Naira is expected to see some pressure against the dollar, according to Cowry Asset Management analysts, due to expected pressure on foreign exchange amid electioneering activity and lackluster petrodollar earnings.
