Naira Depreciates to N1483 after FX Turnover Plunged by 29%

The Nigerian local currency, the naira, extended losses on Wednesday as demand for US dollar eclipsed the supply side following sharp decline in FX market turnover last week.

According to data from FMDQ Securities Exchange platform where official daily exchange rate are quoted, the naira plunged to N1,483.02 per US dollar.

Exchange rate also worsened in the parallel market amidst the Central Bank of Nigeria (CBN) FX sales holiday as the monetary authority failed to support the local currency with forex market intervention sales.

The apex bank stopped FX sales to Bureau De Change operators recently after it had launched subsidised US dollar sales that boosted the value of the local current to about N1000 per greenback.

Since the CBN ask the BDCs operators to re-registered, the naira exchange rate has run amok, hitting near N1,490 per US dollar in the official and parallel market with tiny gap.

Last week, the Nigerian autonomous FX market (NAFEM) rate traded within the range of N1,390 – N1,507 but closed at N1,482.7 in the spot market.

This points towards an appreciation of +0.1% or N1.3 week on week as World Bank foreign currency loan to Nigerian boost investors’ confidence, and douse speculative pressures.

In the forwards market, the naira traded within the range of N1,476 – N1,481.4, according to Coronation Research.  Analysts said in the 1-month contract, exchange rate appreciated by +0.04% week on week to close at N1,499.7, while in the 3-month contract, fx depreciated by -0.2% to close at N1,548.7.

“Based on our channel checks, in the parallel market, the Naira closed at an average of N1,489/USD on Friday. Therefore, the current gap between the NAFEM and the parallel market rate is 0.2%”, Coronation Research said in its FX update.

According to data from FMDQ, total turnover at the Nigerian autonomous FX market declined by -29.2% or USD373.1 million, to close at USD902.9 million on Friday.

Volume of US dollar transacted declined at the official window despite an inflow of USD610.9 million last week.  “…There was no inflow from the CBN in the previous week”, analysts said.

Foreign portfolios investors accounted for 32.1% of the FX supplied, non-bank corporates 34.7%, exporters 28.2%, and others accounted for 5.1% S/Africa: Don Optimistic About GNU Creating Better Opportunities
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