Nigeria’s currency, Naira, recorded marginal depreciation against the dollar at the Nigerian Autonomous Foreign Exchange Fixing (NAFEX), the nation’s official foreign exchange market, despite a significant increase in liquidity.
Increased activities were witnessed in the market on Monday as the daily foreign exchange market turnover rose to $134.30 million compared to $46.31 million recorded on Friday, data from the FMDQ showed.
After trading on Monday, the dollar was quoted at N430, which was higher than N429.62 quoted on Friday, resulting in a 0.09 drop in the value of Naira at the Investors and Exporters (I&E) forex window.
Most currency dealers who participated at the FX auction on Monday maintained bids between N417.00 (low) and N444.00 (high) per dollar.
At the parallel market popularly called the black market, the local currency closed at N675 par dollar, the same rate as of Friday.
Naira recovered from Thursday’s loss as it gained 0.74 percent to close at N675 per dollar on Friday from N680 closed on Thursday at the parallel market.
Read also: Naira fluctuation and matters arising
Nigeria’s external reserves declined 0.5 percent Week-on-Week (w/w) to $38.9bn as of August 10, 2022 from $39.1 billion recorded on August 3, 2022.
The US labour market’s better-than-expected performance and easing inflation mildly doused concerns over slowing global economy and weak oil demand
outlook. As a result, oil prices gained 3.1 percent w/w to close at $97.84/bbl, according to a report by Afrinvest Securities Limited.
The Naira has maintained a free fall, peaking at N431 per dollar at the official market and N710/$ at the parallel market.
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.
“Next week, we anticipate that Naira would continue to trade in a tight band, given the lingering FX demand-supply imbalance,” analysts at Afrinvest said.
Last week at the I&E window, the Naira depreciated N1.50 w/w to close at N429.63/$1.00. Likewise, the legal tender shed N15.00 w/w to N675.00/$1.00 at the parallel market. Activity levels at the I&E window dipped 22.4 percent w/w to $397.5m, the report stated.
This week, only the JULY 2023 (Contract price: N453.88) and JAN 2023 (Contract price: N442.79) instruments saw buy interest as their total value rose 139.4 percent and 43.1 percent w/w respectively to $318.0m and $176.6m. Thus, the total value of open contracts at the FMDQ Securities Exchange (SE) FX Futures Contract Market increased by 6.2 percent w/w to $4.1bn, the report stated.
In the face of rising demand for foreign exchange for both goods and services by Nigerians, the Central Bank of Nigeria (CBN) has advised Nigerians to resist the urge of succumbing to the speculative activities of some players in the foreign exchange market.
Osita Nwanisobi, director, corporate communications at the CBN, said the apex bank remained committed to resolving the foreign exchange (FX) issues confronting the nation and as such has been working to manage both the demand and supply side challenges.