On Thursday, the Nigerian naira slid 28 basis points versus the US dollar in the foreign currency (FX) market as demand pressured it. Analysts predicted that exchange rate problems would endure until there was a clear policy direction to defend the local currency against the major foreign currencies.
Nigeria’s FX liquidity crisis has kept the exchange rate on edge, while the strengthening of the naira’s purchasing power is dependent on the CBN auction. The exchange rate rose by more than 7% after the Central Bank of Nigeria (CBN) paid almost $20 million to purchase local currency midweek.
According to FX spot data from the FMDQ platform, the naira depreciated by 0.28%, closing at ₦1,544.02 per dollar at the official market. “CBN should have a calendar for US dollar sales to authorised dealer banks and perhaps, by extension, Bureau de Change (BDC) operators,” an investment expert who preferred not to be mentioned told MarketForces Africa.
Critics affirmed that it was a grave policy miscalculation to assume that the naira will survive onslaught attack in FX market with the willing buyer, willing seller model. “The country has no comparative advantage in production of anything.. Nigeria has no strategic country’s advantage with weak export flows…
“How does a nation that basically surviving on hydrocarbon sales with near equivalent imports bills survive currency floatation in the first place”?
Today, the naira was relatively steadied at ₦1,645 per US dollar in the parallel market. The level of demand made for invisible FX payment normalised after previous $20,000 subsidized FX sales to BDCs. Now, the activities of currency speculators would gather momentum as gap between official and parallel market exchange rates hit N100.
In the global commodities market, oil prices increased following a larger-than-expected interest rate cut by the Federal Reserve. Thus, as of the latest report, the Brent price is up by 1.72% to $74.92, and the WTI price increased by 1.16% to $72.09.
Additionally, gold prices surged over 1%, as the U.S. Federal Reserve initiated its rate easing cycle. Currently, the price of gold is approximately $2,608.90 per ounce.
