The Nigerian naira fell for the second trading session on the official FX market due to a scarcity of US dollars. The naira has begun to fall in value as the market faces an insurmountable FX liquidity crisis.
Foreign currency demand has surpassed US dollar volume at the autonomous FX window, despite the Central Bank of Nigeria’s (CBN) efforts to shift exchange rate direction through its willing buyer, willing seller policy.
In what appears to be an intermittent distortion of the real exchange rate equation, the market has absorbed FX sales sold to requesters through the CBN’s Retail Dutch Auction System with no long-term consequences.
This market disclosure puts into doubt the CBN’s decision not to protect the local currency. Despite the massive US dollar paid to buy the naira to regain balance, analysts said the amount may not be insufficient to boost exchange rate after all.
In the official market, the naira weakened against the US dollar, depreciating by 0.25% to ₦1,586.04 per US dollar on Wednesday. It is not clear if the CBN has initiated process for its retail FX auction for the week.
The apex bank has not come up with its FX policy timing. However, before the CBN relaunched its retail Dutch auction sales last week, it had been buying the naira from or selling the US dollar to authorized dealer banks each week.
The naira exchange rate is steady at average of ₦1,585 per greenback in the parallel market, as trading activities ended on a quiet note.
In the global commodity market, Brent crude fell by 0.31% to $80.44 per barrel, and West Texas Intermediate (WTI) crude declined by 0.46% to $77.99 per barrel.
WTI futures extended their losses for the second consecutive day following an unexpected rise in U.S. crude oil stocks reported by the EIA.
