For the past two weeks, the naira has been steadily declining as the country’s foreign reserves have been rising. Following the apex bank’s FX intervention sales, official and informal exchange rates fell into a fatal spiral.
The naira continued its decline vs the US dollar, which has already dropped by more than 40% this year, as the FX liquidity problem persists. In the Nigerian Autonomous Foreign Exchange Market (NAFEM), the value of the naira decreased by 21bps, or 0.21%, to N1,512.61, based on data from the FMDQ FX spot rate.
The Central Bank of Nigeria (CBN) said that on Tuesday, foreign reserves increased to $34.432 billion. The CBN has said the authority will not defend the naira in the official window since it floated the local currency in a nation that depends on imports to survive. The apex bank has limited FX liquidity levels in the official window, causing the exchange rate to run amok.
The foreign exchange market saw pressure on the naira from speculative activities and rising demand, causing the naira to weaken against the US dollar across market segments. In the parallel market, the naira depreciated by 0.60%, ending the day at an average of N1,514 per US dollar, according to channel check.
In the global commodity market, oil prices steadied on Wednesday after trading higher due to a bigger-than-expected drawdown in U.S. crude stockpiles, while economic headwinds from China and the eurozone capped gains.
Brent crude futures edged up 0.38% to $86.57 a barrel, while U.S. West Texas Intermediate (WTI) crude futures gained 0.32% to $83.08, with both benchmarks hitting their highest levels since April.
