Naira Steadies amidst Dollar Inflows Expectation
The Nigerian naira closed flat at N446 per United States dollar at the Investors’ and Exporters’ foreign exchange (FX) market amidst expectations that FX Inflows will rise in the final quarter of the year. Contrary to Broadstreet’s expectation, the apex bank is unlikely to devalue the naira in the short term.
At the window, market participants maintained bids between N444 and N450. In the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchained from the previous week as it closed the week at N445 on warm market demand.
Meanwhile, the Nigerian economy will experience FX liquidity tightness as oil prices began to moderate, though with a positive outlook given that the nation’s oil production volume has improved, according to data from the Organisation of Petroleum Exporting Countries (OPEC)
Foreign portfolio investors will remain aloof, according to analysts, saying Nigeria is unlikely to attract foreign investors till mid-year in 2023 due to election uncertainties. At the bankers’ committee meeting held in Lagos at weekend, Godwin Emefiele said exports repatriation from rebates will rise to $1 billion via the window.
Foreign currency inflows have been in downbeat mode amidst uncertainties in the Nigerian macroeconomics environment. Due to uncertainties, analysts believe that the 2023 election remains a downside for FX inflow.
Foreign investors are unlikely to bring the United States dollar into the Nigerian economy until mid-2023, analysts told MarketForces Africa, citing election and the need to gauge market temperature. READ Naira Trades at N446, Exchange Rates Gap Reduces
A slew of analysts believes the naira is overvalued and should be devalued. Despite a loud tantrum from the market requesting for the depreciation of the local currency, the CBN has continued to maintain a no-devaluation stance.
MarketForces Africa gathered that a devaluation will not make the naira strong without structural reforms to improve local productivity. Though devaluation will attract hot monies into the market, it rarely helps keep the local currency in shape for a long period.
Investors exited the Nigerian economy over CBN capital control measures, which raised the FX backlog upward. Comparatively, the naira has been largely insulated from recent FX volatility in emerging markets for a number of reasons.
FX regime in Nigeria has been managed policy than in most emerging markets. At $37 billion, analysts believe that the CBN has ample FX reserves to support current exchange rate levels in case of renewed pressure. Foreign outflows on the debt side were relatively contained in the second half of 2022.
For now, analysts said there is no reason to suggest that the CBN will depart from its stance on Naira, especially as the 2023 elections draw near. # Naira Steadies amidst Dollar Inflows Expectation