Due to a significant increase in foreign exchange liquidity on Wednesday, which eased demand pressure, the value of the Nigerian naira continued to rise.
After the monetary authority started to auction foreign exchange at a reduced spot rate at the official window, the naira started the process of recovering its losses.
FX liquidity continues to be a major obstacle in the process of determining pricing, despite assertions that the value of the local currency is significantly low.
The daily FX spot rate is quoted on the FMDQ site. Based on this data, the naira closed at ₦1,596.52 per US dollar, up 0.28% against the US dollar.
Large amounts of foreign exchange (FX) sold to authorized dealer banks at the Central Bank of Nigeria’s (CBN) retail Dutch auction saw favorable market disposition, which helped to support this gain. The authority attempted to satisfy the growing unmet demand for foreign exchange by reintroducing the Retail Dutch Auction System.
In an effort to increase FX liquidity, the apex bank sold more than $876 million to FX users at the auction on Wednesday. This was done after giving prior notification to authorized dealers and market participants.
According to the auction results, 32 authorized dealers banks submitted offers totaling US$1.18 billion. Of those, bids totaling US$876.26 million from 26 banks qualified, while bids totaling US$313.69 million from 6 (six) institutions were disqualified.
According to data from FMDQ, total turnover declined by -14.3% or US$191 million, to close at USD1.1 billion on Friday at the Nigerian autonomous FX market last week. In the week, the official window recorded an inflow of USD591 million.
The foreign portfolio investors (FPIs) accounted for 7.9% of the sum, while the CBN contributed 21.7%, non-bank corporates was the major driver of the US dollar volume at 44.8%, exporters did 21.9%, and others accounted for 3.7%.
Exchange rate closed at ₦1,590 per US dollar in the parallel market, down by N10 over the previous day’s rate in the parallel market as invisible FX demand grew above total supply.
In the global commodity market, crude oil price appreciated today, amidst the risk of a major escalation in the Middle East. Brent prices increased by 2.77% to $78.60, while WTI prices accelerated by 3.19% to $75.31. Gold prices increased by 0.18% to $2,435.80 per ounce.
