Exchange rate to remain steady as demand for PTA/BTA persists
The naira/dollar exchange rate is expected to trade without much change this week in the face of rising demand for travel allowances amid dollar shortage, analysts in the financial market said.
The travel allowances include Business Travel Allowance (BTA), Personal Travel Allowance (PTA), and school fees.
“We expect the naira to trade relatively calmly across all segments of the FX market in the face of growing dollar demand pressure for BTA and PTA respectively,” analysts at Cowry Asset Management Limited said.
The Foreign Exchange (FX) market ended the five trading days with Naira reporting marginal appreciation driven by improved liquidity.
At the Investors and Exporters (I&E) forex window, also known as Autonomous Foreign Exchange Fixing (NAFEX) window Naira appreciated marginally by N0.08/$ Week-on-Week to N436.25 per dollar from N436.33/$, representing 0.02 percent gain.
This strengthening against the dollar comes despite the continued declines in the price of crude oil for the third straight week while Nigeria repatriates little or no profits from the oil market.
Meanwhile, with the lack of FX liquidity and rising inflation, the local currency depreciated to all-time low of N436.72/USD stoked by unabating demand by Fx users.
At the parallel market, the naira further depreciated by N1 (-0.14%) week on week to close at N709/USD from N708/USD as continued demand pressure stay unabated for another week in the face of declining reserves and low earnings from crude oil exports, a report by Cowry Asset Management stated.
The report noted that the interbank foreign exchange market traded in the mixed bag as the NGN/USD closed flat at N430.00/USD from last week while the financial system got further bolstered by CBN’s FX retail refund where the sum of N150 million got injected into the market. In the meantime, the Naira/USD exchange rate in the Naira FX Forward Contracts Markets appreciated at the short and long tenor contracts where we saw the 2 months, 3 months and 12 months contract closed the week in the positive region and appreciated by 0.01 percent and 0.05 percent and 0.13 percent week on week to close the week at N437.76/USD and N440.08/USD and N475.74/USD respectively.
On the contrary, the report noted that the 1 month and 6 months tenors depreciated marginally by 5bps apiece to close the week’s offering at N435.85/USD and N452.42/USD in that order. Elsewhere, the Bonny light crude price appreciated by $0.57 (+0.62%) w/w to close the week (Sept.15) at USD92.35 per barrel from USD91.78 per barrel in the previous week on the back of low demand.
At the Investors and Exporters window, activity level improved as the total turnover jumped by 15.2 percent w/w to $433.7 million.
Sentiment in the oil market remained downbeat in the week owing to decelerated growth in global oil demand (from 3.1mb/d in H1:2022 to 1.1mb/d in Q3:2022- IEA), according to a report by Afrinvest Securities Limited.
This came on the back of renewed economic pessimism in China. Accordingly, Brent oil price declined 1.2 percent w/w to $91.71/bbl.