The naira fell sharply on the Nigerian Autonomous Foreign Exchange Market (NAFEM) due to deteriorating foreign exchange (FX) liquidity concerns and higher spot rate pricing. As the official exchange rate deteriorates, the Central Bank of Nigeria (CBN) has continued to boost spot prices during FX auction sales, indicating a weakening commitment to defending the naira.
The naira fell by 2.31% on the FMDQ platform, closing at ₦1,690.37 per US dollar on the official market. Despite interventions and significant foreign reserves, the local currency has remained volatile.
The CBN appears to be aligning its FX sales to commercial banks with higher rates, signaling a potential acceptance of the naira’s valuation at the higher end of the spectrum. At a recent FX auction, approximately $144 million was sold to banks, with spot rates ranging between ₦1,640 and ₦1,650 per dollar. This indicates a shift in the monetary authority’s expectations, as analysts suggest the naira is unlikely to fall below ₦1,000 without significant policy interventions.
However, FX sales to banks have not been adequate to maintain the official exchange rate. Interestingly, variations in the parallel market have grown less volatile than the official rate. On the same day, the parallel market saw the naira closing at ₦1,735 per dollar, down by ₦5, spurred by minor increase in demand.
Meanwhile, global oil prices rose as tensions between Russia and Ukraine escalated over the weekend. Brent crude jumped to $73.10 per barrel, while West Texas Intermediate (WTI) reached $68.98 per barrel. However, fears about lower gasoline consumption in China and the prospect of a global oil glut continue to weigh on the market.
Gold prices also rebounded after six consecutive sessions of losses, supported by a pause in the U.S. dollar’s rally. Investors are awaiting guidance from Federal Reserve officials on potential changes in interest rates. Gold traded at approximately $2,617.70 per ounce.
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