The naira depreciated to N1,681 per US dollar in the foreign exchange (FX) market, highlighting an ongoing FX supply crisis driven by heightened demand. Data from the FMDQ platform showed that the naira weakened by 0.62%, closing at ₦1,681.65 per US dollar at the official rate.
This exchange rate breached the Central Bank of Nigeria’s (CBN) typical response threshold, marking the first time in months the rate crossed this key level.
According to Bizwatch Nigeria, the CBN’s FX interventions have decreased recently, worsening the naira’s spot rate despite notable US dollar inflows into the Nigerian economy.
In efforts to bolster FX market confidence, the CBN plans to automate the FX trading platform by December, with testing set for November 2024. Despite various initiatives, authorities have struggled to address imbalances in FX demand and supply, making it challenging to stabilize the naira.
“The CBN aims to solve the exchange rate challenge,” an anonymous financial expert told MarketForces Africa. “But unless imports are restricted for certain items, the willing buyer-willing seller model may not suffice to stabilize the naira.”
Weekly FX interventions by the CBN have failed to reduce exchange rate volatility, with analysts suggesting that the central bank may have realized the risks the retail Dutch Auction System (rDAS) poses to external reserves.
In August, the CBN reintroduced the previously discarded rDAS but faced difficulties sustaining it, as bids reached $1.1 billion. Meanwhile, Nigeria’s external reserves rose to approximately $40 billion this week, according to CBN data.
Despite this, FX intervention sales to authorized dealer banks have slowed. In the parallel market, the naira closed at ₦1,725 to the US dollar, falling by N10 due to renewed pressures. The gap between the official and parallel market rates settled at N44 today.
Elsewhere, oil prices showed mixed movements amid a surge in the U.S. dollar following Donald Trump’s presidential victory. Brent crude decreased by 0.35% to $75.30 per barrel, while West Texas Intermediate (WTI) rose by 0.05% to close at $72.00 per barrel.
These fluctuations reflect current market volatility due to geopolitical tensions and supply-demand shifts, with analysts noting that Trump’s policies could strengthen the dollar, potentially increasing interest rates and pressuring economies like China’s.
Similarly, gold prices fell sharply as Trump’s projected win boosted the dollar to a four-month high. Gold faces further downside risk with an impending Fed rate decision, currently trading at $2,673.00 per ounce.
Data from FMDQ revealed that turnover in the Nigerian autonomous foreign exchange market (NAFEM) declined by 55.69%, or US$204.14 million, week-over-week, ending at US$162.41 million on Friday.
The NAFEM window saw a total inflow of US$723.3 million this week, with contributions from the CBN (18.4%), foreign portfolio investors (26.7%), non-bank corporates (22.9%), exporters (28.2%), and others (3.8%).
