THE Nigerian local currency, the naira breaks against the United States dollar as the spot rate at the Investors and Exporters foreign exchange window hits N431.50, data from the FMDQ Exchange platform shows.
This is the first time that the exchange rate worsen above N431 which was considered a resistance level in 2022. The figure however represented a decrease of 0.35 per cent, compared with N430 it exchanged for the dollar last Thursday.
In absolute terms, the local currency weakened by N1.17 compared to the previous week’s rate. This is significant for manufacturers that seek to pay for large ticket imports, analysts told MarketForces Africa.
The open indicative rate closed at N429.10 to the dollar on Friday. An exchange rate of N444 to the dollar was the highest rate recorded within the day’s trading before it settled at N431.50. READ: Naira Breaks Value as Foreign Reserves Tumble Again
The Naira sold for as low as N418 to the dollar within the day’s trading. A total of 93.54 million dollars was traded at the official Investors and Exporters window on Friday. In the parallel market, there was a slowdown in panic buying after the apex bank injected $265 million to support aviation operators repatriate trapped revenues.
Data obtained from the Central Bank of Nigeria shows that external reserves remain rock solid at $39.02 billion with a $68 million additional inflow while FX market intervention appears cold despite demand pressures. National Bureau of Statistics (NBS), Nigeria report shows that Nigeria attracted $1.535 billion as capital inflows in the second quarter of the year.
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In the second quarter, the country’s total value of capital importation settled at $1.54 billion, from $875.62 million in the corresponding quarter of 2021, showing an increase of 75.34%.
Over a 12-month, NBS data signals there was an improvement in foreign inflows amidst Nigeria’s rising gross domestic products.
However, the sum is 2.40% lower than the $1.57 billion received in the preceding quarter. Cumulatively, a total of $3.11 billion has been recorded as imported capital in the first half of the year.
Foreign investors are not playing the Nigerian game in the financial market while foreign direct investment stands abysmally low when compared with Africa’s largest economy balance sheet size.
“… naira depreciated by 0.27% or N1.17 week on week to N431.50 from N430.33 in the prior week as FX users and traders continue to experience shortages within the market; forcing traders to reserve their greenback holdings for a future date as the CBN continues ignoring traders while it maintains its intervention in the market”, according to Cowry Asset Limited.
At the Interbank Foreign Exchange market, the exchange rate closed flat at N430 amid CBN’s weekly injections of over $200 million.
Of the sum injected in the week, $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $50 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles.
In the forward market, contract rates inched higher across all tenors, safe for the 12 months contract which closed the week in the opposite direction at N477.74 from N478.51, according to currency traders’ notes.
However, the naira depreciated 1.3% at the 1-month contract to N434.44 per dollar. Also, exchange rate for 3-month contracts decline 0.9% to N440.19 and 6-month depreciated 0.3% to N452.58.
“We expect the Naira to trade in a relatively calm manner band across all segments barring any significant market distortions as the CBN continues its weekly FX market interventions”, analysts at Cowry Asset stated.
At the Investors and Exporters FX window, total turnover as of 1 September increased by 2.9% from the beginning of the week to $655.74 million, with trades consummated within the N417.00 – N447.48/$ band, according to Cordros Capital.
