Amidst the Central Bank of Nigeria’s (CBN) strategy to increase the buying power of the local currency, exchange prices fluctuate in various ways throughout the foreign exchange markets.
In line with the apex bank’s intention to clear the remaining FX backlog, the US dollar was sold at the Nigerian Autonomous Foreign Exchange Market for less than N800.
At the bankers’ luncheon, Yemi Cardoso, the governor of the Central Bank of Nigeria (CBN), stated that uniform, transparent, and easily understandable regulations regulating market operations are crucial to guaranteeing the smooth operation of both the local and foreign currency markets.
“New foreign exchange guidelines and legislation will be developed, and extensive consultations will be conducted with banks and FX market operators before implementing any new requirements.
“We have already witnessed improvements in FX market liquidity in recent weeks, as the market responded positively to tranche payments which have been made to 31 banks to clear the backlog of FX forward obligations.
“We have been subjecting these payments to detailed verification to ensure only valid transactions are honoured. In a properly functioning market, it is reasonable to expect significant FX liquidity, with daily trade potentially exceeding $1.0 billion”, Yemi Cardoso said at the annual bankers’ dinner in Lagos.
Data from the FMDQ Platform showed the exchange rate closed at N794.84 per US dollar. At the parallel market, the naira weakened ₦1,150.00.
Currency traders at Afrinvest Limited in a weekend note said activity level in the NAFEM window improved by 11.1% week on week to $817.7 billion from $736.3 billion in the prior week.
Data from the Central Bank website showed that external reserves declined further despite marginal recovery in the commodities market.
Brent crude oil price futures inched higher by 1.4% to close at $81.75/bbl., as traders remained on the sideline ahead of OPEC+ meeting.
The anticipated meeting would focus on output cut agreements for 2024, following a recent downturn in oil prices due to strong supply from non-OPEC producers.
Nigeria’s FX reserve maintained its downward trend as the gross reserves declined by USD98.78 million on weekly comparison to close at USD33.20 billion.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts of the Naira remained at $4.2 billion.
“We do not foresee any changes given that CBN has cleared all Non-Deliverable Forwards (NDFs) open contracts, shortly after rendering contracts for tenors between one and twelve months inactive in response to reforms in the NAFEM window.
“In the coming week, we expect rates across different FX segments of the market to depreciate following demand-supply imbalance”, Afrinvest said in its note to investors.
In the forwards market, the naira recorded depreciation across the 1-month (-5.1% to N911.07/USD), 3-month (-5.5% to N941.38/USD), 6-month (-6.9% to N984.57/USD) and 1-year (-5.0% to N1,028.36/USD) contracts.
