In the Nigerian independent foreign exchange market, the naira cleared at N1,601 per US dollar on Tuesday as the local currency started to recover losses.
The week following the Central Bank of Nigeria’s (CBN) FX auction sale to approved dealer banks to increase liquidity, the exchange rate saw improvement for two days in a row.
One negative factor affecting the Nigerian naira’s potential to recover value is the FX liquidity issue. According to research by AIICO Capital Limited, the naira depreciated against other currencies in July as a result of rising demand, which was partially caused by seasonal factors.
Analysts noted that even with less volatility in the exchange rate, the naira continued to fall in spite of the Central Bank of Nigeria’s (CBN) attempts to interfere in the market, especially in the latter part of the month.
The CBN initially sold $122.67 million and $106.5 million to authorized dealer banks, followed by an additional supply of over $120 million at the end of the month to ease demand pressures.
On Tuesday, the naira appreciated by 0.38%, closing at ₦1,601.00 per US dollar. At the current exchange rate, the gap between the official and parallel market rates has narrowed to N25 on each US dollar.
According to channel checks, the naira closed at ₦1,575 per US dollar, gaining N10 over the last two days. Demand for the US dollar at the informal currency market remains elevated, but economic activities have been affected by the ongoing protests.
Elsewhere, Nigeria’s gross external reserves rose to $36.86 billion, hitting an 18-month high as inflows from various sources continued to boost the amount.
In the global commodity market, Brent crude increased by 0.53% to $76.71 per barrel, and West Texas Intermediate (WTI) crude rose by 0.72% to $73.47 per barrel on Tuesday.
“We anticipate a slight depreciation in August. This is due to recent decisions made by the CBN regarding the sale of foreign currencies to meet ongoing demand and seasonal fluctuations.
“While the $500 million loan from the African Development Bank is expected to support the market, we anticipate a slight impact from this development,” AIICO Capital Limited said in a report.
