As the Central Bank of Nigeria maintained its break from foreign exchange intervention, pressure on the naira, the indigenous currency of Nigeria, is still there in the FX markets. Friday’s naira depreciation was N1505.30 per US dollar, based on data from the FMDQ website, which provides daily spot values.
The exchange rate has failed to equilibrate and is now approaching the spot rate of the parallel market with a small gap due to the ongoing demand for foreign currency in the absence of any intervention.
According to the most recent exchange rate, the local currency decreased by N19.77 on a weekly basis from the ₦1,485.53 it had at the end of the previous week. Because the apex bank refrained from participating in the official market, foreign exchange liquidity in the official market remained low.
This happened despite growing inflows into external reserves. Nigeria’s FX reserves grew for the fourth consecutive week, according to data from the central bank.
Information from the CBN showed that gross reserves level increased further by USD442.47 million to USD34.14 billion, thus proving import cover for seven months.
The total turnover at the market advanced by 29.1% to USD845.03 million on Thursday from the beginning of the week, with trades consummated within the N1,4110 – N1,577, Cordros Capital Limited said in a note.
“We point out that the frail liquidity in the FX market underpinned the increased volatility on the naira this week as interventions by the CBN remain muted, together with weak offshore participation.
“In the short term, we anticipate the naira remaining under pressure, barring any significant FX interventions from the CBN”, Cordros Capital said.
In its latest report, the Nigerian Exchange said transaction levels were boosted by increased inflows from local and foreign investors.
Specifically, inflows from foreign investors increased by 2.9% months on months to N124.28 billion in May from N120.83 billion in April due to improved sentiment amidst expectation that the Nigerian economy would rebound.
On the parallel market, the naira closed at N1,514 per US dollar over accelerating foreign currency demand for invisible FX transactions.
