The naira surges to N1,576 versus the US dollar in the foreign currency (FX) market following notification of FX sales to Bureau de Change (BDC) operators. The considerable daily exchange rate movement was fueled by better FX liquidity conditions in the currency market yesterday.
According to Bizwatch Nigeria, the Central Bank of Nigeria (CBN) announced $20,000 in foreign exchange sales to BDCs at N1,579 per US dollar, capping the operators’ spread at one percent of their respective purchasing rates.
The sale of the US dollar to BDCs lowered demand pressure in the parallel market while increasing investor trust in the official foreign exchange market. Despite increased external reserves, some analysts believe the CBN will not sell foreign exchange through the retail Dutch Auction System in September.
According to data from the apex bank, gross external reserves climbed to $37.868 billion on Wednesday on the back of steady growth in FX inflows in the economy.
But analysts said it is default for the apex bank to deploy the fx reserves to defend the naira because huge part of the balance has been pledged for external deals – including forward, swaps and oil backed loans.
At the Nigerian autonomous foreign exchange window, the naira appreciated by 5.48% against the US dollar, closing at $1 to ₦1,576.10.
The Naira closed at ₦1,675 to the US dollar in the parallel market after FX sales at discount rate but cap on spread. The positive developments, which include rising external reserves, and FX liquidity boost in the parallel market, reduce pressure in the Nigerian currency market.
The next FX inflows could push gross balance in the external reserves above $38 billion, analysts told MarketForces Africa, requesting the apex bank to set a timeline for FX sales auctions to quell the US dollar shortage challenge in the market. In the global commodities market, oil prices fell by nearly 3% due to a report stating that Saudi Arabia plans to increase production later this year.
At the time of the report, Brent prices dropped by 2.87% to $71.35, while WTI prices declined by 3.27% to $67.21. On the other hand, gold prices continued to rise, reaching $2,694.30 per ounce.
