Sunday , July 14 2024
Naira Weakens as Forex Trade Drop by 27%

Naira Weakens as Forex Trade Drop by 27%

The Nigerian naira depreciated to N462 per the United States (US) dollar on Monday following a strong decline in activity level in the investors’ and exporters’ foreign exchange (Forex) window last week.

In the parallel market, the naira appreciated by about 0.3% today, exchanged at N760 from N762 amidst election jittery in the country.

The exchange rate movement data indicates that the gap between parallel and official Forex spot rates declined to N298 on each US dollar, signifying the size of the naira overvaluation against the open market rate.

Currency traders said the open indicative rate closed at N461.35 to the dollar on Monday. An exchange rate of N462.05 to the dollar was the highest rate recorded within the day’s trading before it settled at N462.

The Naira sold for as low as N446 to the dollar within the day’s trading. A total of 54.37 million dollars was traded at the official Investors and Exporters window on Monday, according to Forex traders.

With a slowdown in demand in the Forex markets, the exchange rate appreciated to N461.17 on Friday from N461.25 per greenback as the volume of United States (US) dollars traded declined.

In a market note, a Lagos-based investment banking firm, Afrinvest Limited, told customers via email that activity level or volume of US dollars transacted at Investors’ and exporters’ FX window fell 27.0% week on week to $362.6 million.

With an expectation of a naira devaluation, some Broadstreet Forex analysts reported that trades were consummated within the N406.75 – N478.78 versus the US dollar band.

A similar trend was noticed in the parallel market where the Nigerian naira trades freely. The exchange rate improved to N762 in the parallel market, from N765. Meanwhile, data from the Central Bank (CBN) indicates that in a week, Nigeria’s external reserves declined by US$36.76 million to close at US$36.72 billion.

In the forwards market, the naira rates appreciated across the 1-month, up 0.3% to N485.47. Also, the 3-month contracts gained +0.5% to N491.72 while the 6-month contracts appreciated by +1.5% to N525.72.  In the market, 1-year contracts gained more, up 8.2% to N571.95.

“We believe FX liquidity issues will remain over the short-to-medium term as we do not see any positive signal that denotes an improvement in FX supply relative to the pre-pandemic levels”, analysts at Cordros Capital said in a note

About Bukola Olanrewaju

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