The naira rose by 2.4% week on week as the Central Bank of Nigeria (CBN) supported the local currency with $60 million in the official market. The exchange rate rose due to increased FX liquidity in the Nigerian independent foreign exchange market, which was aided by the CBN’s FX auction for banks.
The Central Bank of Nigeria sold $60 million at ₦1,540 to deposit money banks after the currency fell to N1,660 on Thursday. According to spot data from the FMDQ platform, the naira increased by 2.47% week-on-week, ending at ₦1,600.78 in the Nigerian independent foreign exchange window.
Despite domestic economic pressures, external reserves continued to rise, increasing by US$206.16 million week on week to US$38.88 billion. Nigeria’s foreign reserves have shown favorable trends during seven consecutive week of accretion partly due to FX purchases from Foreign Portfolio Investors (FPIs), Cordros Capital Limited said in a note.
Total turnover in Nigeria’s independent FX market fell 33.1% to USD1.22 billion on Thursday, according to separate data from investment firms. According to analysts, trades were made between N1,540 and N1,682 throughout the time, as the naira continued to weaken due to limited FX liquidity.
In the forwards market, naira rates fell by 1.5% to N1,699.15 for the one-month contract, -1.4% to N1,770.51 for the three-month contract, and -0.4% to N1,862.89.
However, FX rate for one year forward contract appreciated by 0.9% to N2, 067.69. Exchange rate worsened further in the parallel market as demand and supply imbalance extended through the week in the currency market. Demand continues to overshadowed the volume of foreign currency available in the black market, and this shifted exchange rate above N1,700 per US dollar.
Analysts said seasonal demand for foreign currency could worsened spot rate in the informal currency market except the Apex Bank sells US dollar to Bureau de Change (BDC) operators in the alternative currency market that accommodates invisible FX payments.
“Barring any shock, we anticipate the naira will remain less volatile in the short term as the CBN maintains intervention in the FX market. This will also be supported by the improved FPI inflows into the FX market due to carry trade opportunities in the capital market”, analysts at Cordros Capital Limited said.
Based on data by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Nigeria’s crude oil production (including condensates) declined by 1.7% to 1.54 million b/d in September from 1.57 mb/d after five consecutive months of increase.
Analysts attributed the decline in the period to lower production volume recorded across the Forcados, Akpo, Qua Iboe, Odudu and Escravos production terminals. Production volume from Forcados declined by 19% in September, Akpo dipped by 11.8% in the same period, and Qua Iboe supply fell by 7.8% while output from Odudu and Escravos terminals declined by 4.7% and 3.5%, respectively.
On the other hand, the Brass terminal production volume inched higher by +18.8% in September; Bonny output also increased by 11.3%, while output from Agbami terminal rose by 2.5% in the same period. Cordros Capital Limited states that overall crude oil production remains below pre-COVID levels of 2.14 million b/d in the first quarter of 2022.
The lower production is attributed to the lingering effects of insecurity and infrastructure decay, as well as low investment in the sector exacerbated by the exit of international oil companies (IOCs) and unresolved issues regarding the approval of oil asset transfers.
“While progress is still underway as regards the fight against crude oil theft and pipeline vandalism, we believe that challenges plaguing the sector still pose downside risks to crude oil production in the near term,” analysts said. Oil prices dropped by 7% amidst uncertainties in the global commodities market.
The price decline in the oil market was fueled by concerns over demand from a slowdown in Chinese economy growth and reduced supply risks from Middle Eastern conflicts. On Friday, Brent crude was priced at $73.55 per barrel, while WTI sat around $69.70.
Elsewhere, gold surged past the significant $2,700-per-ounce mark, reaching around $2,731.40, driven by rising tensions in the Middle East and uncertainty surrounding the U.S. elections.
