Despite the dollar liquidity increasing by 83.94% in the official market, the Naira ended the week’s fifth trading day with a loss of 3.78%.
The foreign exchange (FX) market opened the week on Monday, October 16, 2023 at 778.80 Naira to the dollar and ended the week at 808.27 Naira to the dollar on Friday. nigerian Autonomous Foreign Exchange Market (NAFEM).
NAFEM is a market trading segment for investors, exporters, and end users that allows foreign exchange (FX) trading at exchange rates determined based on prevailing market conditions.
According to FMDQ data, for the trading day in question, foreign exchange market volume increased by 83.94 percent to $79.26 million on Friday, the last trading day, from $43.09 million recorded on Monday, October 16, 2023, to $79.26 million. It was shown that the supply of
Also read: Naira soars to Nera 1,170/$ due to dollar shortage
Analysts said a combination of demand for 43 items restored to access foreign currency and demand for school fees caused the value of the naira to plummet last week.
In the parallel market, commonly referred to as the black market, the Naira depreciated by 1.82% as the dollar began the week at 1,149 Naira on Monday and closed at 1,170 Naira on Friday.
Nigeria’s foreign exchange reserves decreased by 6 basis points ($19.1 million) to $33.2 billion as of October 18, 2023.
“The Nigerian naira continued to weaken this week, hitting new lows, highlighting the challenges faced by Nigeria’s central bank in defending its currency,” analysts at Cowley Asset Management Limited said in a report.
According to the report, the dollar depreciated by 5.68% compared to the previous week on the official market, mainly due to the shortage of US dollar supply, and closed at N808.27 per dollar. Demand remained high in the parallel market, further pushing the naira to historic all-time lows.
By the end of the week, the naira had depreciated by 11.43% week-on-week, mainly due to speculative activity, hitting a historic low of 1,170 naira per dollar.As a result, the market premium is
In the foreign exchange futures contract market on the FMDQ Stock Exchange (SE), the US dollar appreciated against the naira over various contract periods, with one-month gains of 2.10%, 2.15%, 2.03%, 1.76% and 2.22%.Monthly, 3-month, 6-month and 12-month futures contracts with closing prices of 805.92 Naira/$1, 816.47 Naira/$1, 824.20 Naira/$1, 852.67 Naira/$1, 919.65 Naira /$1 each
On the other hand, crude oil prices are hovering around $90 per barrel, and there is a possibility that crude oil prices will rise further.
Brent crude had a relatively stable week at around $89 per barrel. Notable developments include a U.S.-Venezuela agreement that allows U.S. oil companies to resume operations in Venezuela, which could impact global oil production. Furthermore, amid rising tensions in the Middle East, OPEC’s silence on demands for an embargo on Russian oil has heightened concerns about production increases that could put downward pressure on crude oil prices. However, Nigeria’s Bonnie Light crude rose on a weekly basis, closing at .
It rose from $95.59 to $98.26 per barrel, representing a 2.79% increase for Nigeria in the oil market.
“In the future, the naira is expected to face continued pressure in the foreign exchange market due to current market conditions and volatility. Despite recent policy shifts aimed at enhancing liquidity, the central bank The defensive ability of
The Naira’s exchange rate against the US dollar appears to be limited. “Speculative activity is increasing, further increasing demand for the US dollar,” the analyst said.