In the midst of a continuing foreign exchange (FX) crisis in the local economy, the value of the naira, the native currency of Nigeria, further declined, reaching a new red line. The Central Bank’s (CBN) position that it would not devalue the naira is losing ground.
Despite a little influx into the external reserves, the exchange rate declined to N464 per US dollar as demand for qualifying transactions outweighed availability of foreign currency.
Several economists have forecast that the naira will surpass N500 barring an improvement in foreign portfolio investment inflows. That has not been the case; instead, foreign interest in supporting the regional economy is waning.
The state of the world economy has an impact on remittances, particularly the inflation and job losses that occurred earlier this year in the developed economy where Nigerians labor.
According to figures from the Central Bank, Nigeria’s gross external reserve slightly grew, rising by USD38.89 million week over week to close at USD35.43 billion. The FX revenues were bolstered by a rise in crude oil prices and came after a fall of twelve straight weeks.
Following indications of a rebound in China’s demand as seen by the most recent statistics showing an increase of 22.0% in March’s oil imports, the price of Brent crude oil increased 1.3% last week to $86.25/bbl.
Investors were informed by analysts at Cordros Capital that overall activity at the window fell by 27.4% up till Thursday to USD297.42 million; deals were completed in the range of N460.00 to N507.08.
Separate analyst notes state that as of Friday, the amount of activity had decreased by 50.2% to $297.4 million. The Naira, however, continued to rule the open market, outperforming the dollar by N9 or 1.21% week over week to settle at N738 from N747 the week before.
On the other hand, the Naira dropped N0.75 or 0.16% week over week in the investors’ and exporters’ FX window, closing at N464/USD from N463.25. According to data, the spot exchange rate closed at N462 per United States dollar on Friday.
The exchange rate in the weekly Naira FX Forward Contracts Markets was mixed. FX analysts saw a 1-month contract depreciate by 0.5% to N469.20, just as 3 months lost 0.5% to N485.8 and 6 months dropped 0.4% to N513.22. On the other hand, 1-year contract gained +0.6% to N562.49.
