The value of the naira firmed slightly at the parallel market last week despite the sellout of equities on the Nigerian capital market by foreign investors as inflow of foreign exchange from both the Central Bank of Nigeria (CBN) interventions and sales on the Investors’ and Exporters’ window amounted to $2.1 billion.
From N366 which it had dropped to in the penultimate week, the value of the naira firmed to N363 to the dollar on the streets. The CBN had increased its forex sales to the bureau de change market, selling $20,000 to the money changers three times a week as against the twice a week sales which it held previously.
The CBN had recently issued a new directive on foreign exchange sales in the country, mandating banks to have a foreign exchange desk and ensure that travellers have immediate access to foreign exchange over the counter in banking halls.
Last week, had further boosted forex liquidity and injecting $551.35 million into the economy during the four day trading of the week as inflow from the Nigeria Autonomous Foreign Exchange Market (NAFEX) also known as the I&E window closed at $1.624 billion.
Activities at the Investors and Exporters window which dropped in the previous week was expected to witness a slow down as trading held for only four days due to the democracy day celebration however, trading picked up to $1.624 billion as against the $947.35 million of the previous week.
The CBN in its two intervention for the week injected $210 million and $331.41 million into the foreign exchange market on Wednesday and Friday respectively. The Wednesday intervention which failed to save the naira from depreciation on the I&E window as the currency fell to N362.57 per dollar from N360.85 per dollar the previous week. The currency at the parallel market rose from N366 per dollar last Friday to N363 to the dollar.
Acting Director Corporate Communication department of the CBN, Isaac Okorafor noted that the central bank is “buoyant enough to meet the foreign exchange requests of various customers cut across the different segments of the market.”
He explained that “Nigeria, Africa’s largest oil producer, fell into recession in 2016 largely due to low crude prices. Lower oil revenues led to foreign currency shortages because crude sales are the country’s main source of foreign exchange. It emerged from recession last year as crude prices recovered, but it has maintained a system of multiple exchange rates in an attempt to reduce pressure on the local naira currency.”
The naira closed last week stronger than it started out selling at N363 per dollar and $361.62 at the parallel market and the I&E window respectively. Analysts with FXTM, Lukman Otunuga noted that while the naira could find itself pressured by an appreciating dollar, losses may be limited by the improving sentiment towards the Nigerian economy.
According to him, with the pending US jobs report potentially impacting Fed rate hike expectations, emerging market currencies like the naira could be affected. “A solid US jobs report for May that fuels speculation of higher US interest rates this year may spell more pain for emerging markets currencies.”