In one day, naira rises by 4.5% as demand eases

Naira, Nigeria’s legal tender, which exchanged with the dollar at a peak rate of N710, has within one day recorded a 4.5 percent increase in value as demand for the greenback eases at the parallel market, popularly called black market.

After trading on Tuesday, naira closed at N660 per dollar as against N690/$ closed on Monday at the parallel market.

Naira’s appreciation was as a result of low demand for dollars by the end users, one trader told BusinessDay.

At the official market also known as Investors and Exporters (I&E) forex window, naira strengthened by 0.42 percent as the dollar was quoted at N430.67 on Tuesday compared to N428.88/$ closed on Monday, data from the FMDQ has revealed.

Most currency dealers who participated at the FX auction maintained bids between N415.00 (low) and N444.00 (high) per dollar.

The daily foreign exchange market turnover declined by 163.28 percent on Tuesday to $158.68 million from $60.27 million recorded on Monday, data from the FMDQ indicated.

Demand pressure and limited foreign currency inflows triggered depreciation of the Naira, widening exchange rate premium, according to the FSDH macroeconomic report.

Other factors responsible for naira free fall include rising strong dollar, import demand, oil theft, fuel subsidies, currency speculation, record high money supply and weak productivity.

The Central Bank of Nigeria (CBN) had applied all measures necessary including interventions in critical sectors of the economy, to ensure stability of the naira.

Read also: Weak naira adds N548bn to Nigeria’s external debt

“We recognize some CBN interventions as they show signs of supporting foreign exchange inflows, especially the “Race to US$200 billion in FX Repatriation (RT200 FX Programme)” initiative. But then, the outcomes are far-fetched from matching the demand for foreign exchange. This is because there is still no clear-cut and effective footprint to drive output expansion across sectors for exports”, the report stated.

At the money market on Tuesday, the Overnight (O/N) rate increased by 4.50 percent to close at 15.00 percent as against the last close of 10.50 percent on Monday, and the Open Repo (OPR) rate increased by 4.33 percent to close at 14.33 percent compared to 10.00 percent on the previous day, a report by the FSDH noted.

The Nigeria treasury bills secondary market closed on a flat note with the average yield across the curve closing flat at 7.69 percent. Average yield across short-term, medium-term, and long-term maturities remained unchanged at 11.19 percent, 5.86 percent, and 6.32 percent, respectively. NTB 11-Aug-22 (-1 basis point) maturity bill witnessed mild buying interest.

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