Naira Recovering from Demand Shock at Official FX Market
The Nigerian local currency, the naira, continued to recover from the demand shock launched at the Investors’ and Exporters’ foreign exchange (FX) window at the beginning of the following moderate inflows into external reserves.
According to data obtained from FMDQ, the exchange rate at the Investors and Exporters window appreciated by 1.01% to N782.68 per United States (US) dollar.
However, the market experienced a worsening spot rate at the parallel market where traders exchange US dollars for N1,150 due to a widening gap between supply and demand for foreign currency. The spot rate of N782.68 at the Investors and Exporters window indicated that the naira strengthened by 1.1% from the previous day’s rate of N790.68 per dollar.
FX rate closed near N850 per greenback on Tuesday, reaching N980 during an intraday trading session, according to data from Refinitiv. There has been a normalisation of currency trading activities in the official market in the last two days, an exchange rate report from the FMDQ OTC FX platform showed.
In the parallel market, analysts said the Naira’s performance was less favourable, depreciating by 4.55% to close at N1,150 against the US dollar. Nigeria recorded foreign currency inflows into the external reserves this week as the price of oil recovered from the Israeli-Gaza war. The nation’s gross external reserves inched upward over three days to $33.242 billion.
Nigeria is also expecting an inflow of $1.5 billion obtained from the World Bank by the government to bridge the revenue and spending gap. In the commodities market, the price of oil experienced a minor recovery attempt but ultimately succumbed to the prevailing pressure, hovering around the $90 price range.
Specifically, West Texas Intermediate (WTI) crude was priced at $87.35 per barrel on Thursday, while Brent Crude remained steadfast at $90.40 per barrel. Market participants were closely monitoring Russia’s plans to increase its supply to China and contemplating the feasibility of sustaining this supply arrangement for seven years.
#Naira Recovering from Demand Shock at Official FX Market Naira Devaluation Deepens Economic Crisis in Nigeria