Naira Bruise Deepens, USD Scarcity Unsettles FX Markets

The Nigerian naira depreciated further on Friday with depressed exchange rate outlook. The future of the local currency appears bleak following sub-par FX market intervention. The central bank maintained no support for the local currency despite surging demand for foreign currency in the market.

Last week, the apex bank sold US dollars to local deposit money banks and other authorised dealers at Nigeria’s autonomous market. But FX spot rate failed to improve even with US dollar sales to Bureux de change.

There is problem with timing of FX sales, analysts told MarketForces Africa, saying previous FX injections have shown market participants the power of FX influx into the currency market.

“You know regulators don’t speak on air… Yemi Cardoso, the governor of the Central Bank of Nigeria, has not learned to keep market secret”, a financial expert said in a chat with MarketForces Africa about the outlook for the naira.

Since CBN governor said the authority is maintaining a willing buyer, willing sellers FX model, denied support for the naira using the external reserves. Meanwhile, in its latest update, the International Monetary Fund, IMF, encouraged the CBN to have a well-designed FX market intervention. 

Analysts told MarketForces Africa that few countries leave local currency on willing buyers and willing seller when FX inflow isn’t guaranteed per period. “Bank of Japan is backing up Yen after spiraling against the US dollar; supporting the naira when it is needed isn’t a bad idea”, analysts said, while noting that the problem has to be addressed from the root.

The naira may have no capability to fight against the dominant foreign currency due to import dependent nature of the country, according to some analysts who believe that the liquidity level in the market has plunged due to selloff in naira denominated financial instruments by foreign interest.

On Friday, the Naira depreciated against the US dollar by 0.45% to close at ₦1,466.31 in the official market. In the parallel market, the Naira closed at ₦1,425 against the US dollar as demand level surged further.

External reserves steadied amidst bullish development in the global commodity market.  Oil prices experienced an increase, with Brent crude rising by 0.06% to trade at $83.93 per barrel, and West Texas Intermediate (WTI) crude oil also increasing by 0.12% to trade at $79.36 per barrel #Naira Bruise Deepens, USD Scarcity Unsettles FX Markets Customs Hands Over Fake U.S. Dollars, 148 Drones to EFCC, Army
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