• Monday, May 27, 2024
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BusinessDay

Naira weakens to 1,402/$ at official market on low liquidity

Naira loses 1.47% on black market after rate hike

The naira, Thursday, fell to 1,402.11 per dollar, at the official foreign exchange (FX) market, from N1,390 quoted on Tuesday according to data by the FMDQ securities Exchange.

On Monday, the naira fell to 1,419.11 per dollar, the lowest since March, 2024 at the official foreign exchange (FX) market, as foreign portfolio inflows slowed.

The naira also traded in the parallel market to N1,380/$ on Thursday from N1,350/$ quoted on Tuesday according to BDC operators who spoke with BusinessDay.

Analysts at Coronation Securities Limited said that a sudden surge in demand for FX reversed earlier gains against the dollar.

“There was a sudden surge in demand for foreign exchange in the market last week, following comments from the CBN that it was not using its reserves to defend the Naira. As a result, the Naira continued to reverse its earlier gains against the US dollar. The gap between the official and street markets had widened to 4.54 percent (vs 2.56 percent the preceding week). The CBN’s published gross foreign exchange reserve added 0.08 percent, ending the week at US$33.13bn,” the Coronation weekly update stated.

Last week, Olayemi Cardoso, the CBN Governor stated that the Apex Bank was not using its foreign reserves to defend the naira at the IMF spring meetings in WashingtonD.C.

“It is not my intention to defend the naira. We’re pushing the markets to a willing buyer/willing seller, price discovery. And ultimately, I perceive a future where the central bank will not need to intervene. What is important to us is that there’s sufficient liquidity in the market, which I’ve spoken about here today,” he said

Taking advantage of the recent hike in the interest rate by the Central Bank of Nigeria (CBN) and short-term appreciation of the exchange rate, the FPIs made huge returns and withdrew their money from the Nigerian economy, BusinessDay earlier reported.

Olaolu Boboye, Lead Economist at CardinalStone Limited, an investment bank based in Lagos, said foreign investors are exiting for what they perceive as stable, in an earlier interview.

Investors have made tons of money from when they came in the first quarter. When they arrived, they were offered as much as 26 percent on Treasury bills and even more from the naira appreciation. “Another which is more fundamental is that we are not seeing adequate fiscal support,” he stated.