Naira on Monday strengthened by 0.26 percent (N2) against the dollar as demand slows at the parallel market, also known as black market.
Traders said on Monday that there was enough dollars but not much demand for the greenback in the market.
The Central Bank of Nigeria (CBN) sold at the rate of N462.05 per dollar as of June 2, 2023, the data on its website showed.
The naira/dollar exchange rate closed flat at N464.67/$1 at the Investors and Exporters (I&E) forex window on Friday as the CBN sold the dollar at N645 at its latest auction.
The FX auction results on Friday showed this was 27.90 percent (N180) lower than N465 where the currency is trading on the official secondary market, according to Reuters.
Nigeria operates multiple exchange rates, which the central bank has used to manage demand, mask pressure on the naira and conserve its dwindling reserves. The system has fuelled a black market, trading sharply lower than the spot rate, Reuter’s reports.
The demand level for dollars eased marginally at the various FX segments, following the policy statement by the new administration on plans to unify the exchange rate and also bring about a moderation in the interest rates as part of efforts geared towards increasing investment and consumer purchasing power in ways to sustain the economy at higher level, according to a report by Cowry Asset Management Limited.
Consequently, the naira traded in a bullish sentiment as it appreciated by N15 or 1.96 percent week-on-week (w/w) to N752/$1 from N767/$1 at the parallel market.
At the investors’ and exporters’ FX window, the naira depreciated marginally against the United States’ dollar by N0.16 or 0.03 percent w/w to close at N464.67/$1 from N464.51/$1 in the previous week as the hegemony of the dollar continues while players in the market kept bids between N463 and N470.
The report noted that at the Interbank foreign exchange forward contracts market, the spot exchange rate remained unchanged, closing at N462/$1, the report stated.
“Also, in our analysis of the Naira/USD exchange rate at the weekly Naira FX forward contracts markets, the dollar reigned with positive appreciations across all forward contracts against the Naira,” analysts at Cowry Asset Management said.
Last week, the Brent Crude traded at $76.81 per barrel on the back of positive US debt ceiling talks. However, on the home front, the Bonny Light crude price lost its gains of last week by 7.61 percent or ($6.15) w/w, to close at $74.65 per barrel from $80.80 per barrel in the previous week.
“We expect the naira to trade in a relatively calm band across various market segments barring any market distortion and as the apex bank continues its weekly FX market intervention to defend the value of the naira,” the analysts said.