The naira fell on Thursday as a result of a persistent mismatch in the demand and supply of foreign currency in the official and unofficial markets. According to data from the Central Bank of Nigeria (CBN), gross external reserves are at $35.2 billion, with an estimated outflow for weekly FX auction sales to authorised dealers.
The local currency crisis is dragging on, and FX reform is unlikely in the near term, traders told MarketForces Africa in a conversation, adding that Nigeria’s new administration might take the wheel.
The naira fell versus the dollar in the Investors, Exporters FX market, trading down at N463.67 due to rising bids. The spot rate yesterday was N463.33.
On Thursday, the open indicative rate was N463.85 to the dollar. The highest rate recorded during Thursday’s trade was N467 to the dollar, before it finished at N463.67.
During the day’s trade, the naira fell as low as 460 to the dollar. A total of 157.56 million dollars were transacted in the official Investors and Exporters window on Thursday.
Similarly, the parallel market declined by 0.09% to N770 from N763 as demand for Invisibles began to trickle into the open sector following a 50% drop in local FX users’ foreign currency limit for business and personal reasons.
With Dangote Refinery production expected to enter the market in the second half, several currency analysts stated that the prognosis for the naira will improve – albeit not significantly- in the short term.
The refinery that becomes operational this week will help Nigeria reduces FX spending associated with oil and gas imports. This will boost external reserves and strengthen the local currency.
Despite being heavily dependent on foreign goods and services, Nigeria continues to face foreign currency scarcity. Forex illiquidity pressures have been a downside to naira stability, losing 10% in the financial year 2022.
The challenge of capital flight is a key concern for monetary authority.
Analysts said the elevated interest rates by global central banks have continued to reinforce flight to safety as foreign portfolio investors shed their investment portfolio in emerging markets and developing economies in favour of safer haven advanced economies.
Market analysts think foreign exchange stability and liquidity concerns will continue to weigh on foreign portfolio inflows.
