In the investors’ and exporters’ foreign exchange window, the naira, Nigerian weak local currency, fell 0.02 per cent to N416.33 against the United States dollar as pre-election activities, spending begins to gather steam.
The political climate is becoming intense, and demand for foreign currencies including the United States dollar has been projected to rise as election spending is often conducted in hard currencies.
With the expectation of an increase in demand for foreign currencies, Nigeria’s currency is projected to lose value as political demand for the greenback would keep naira on a tight edge in the currencies markets, based on historical antecedents.
In the parallel market, the Nigerian naira weakened also against the greenback to N588 on Friday, from N587, though there was an accretion into the external reserve.
Data from the Nigerian Central Bank shows that foreign reserve was credited by more than $21 million to $39.55 billion, according to the apex bank website.
In a market review, Cordros Capital analysts hint that this is the first time in the last four weeks that there was an inflow into the nation’s gross external reserve.
At the Investors and Exporters FX window, total turnover or volume of dollars transacted as of 31st March 2022 increased by 21.9% from the beginning of the week to $752.97 million.
Currencies traders at Cordros Capital hint that trades consummated within the N410.00 – N453.25 per the United States dollar band. At the Interbank Foreign Exchange Market, the FX rate closed flat at N430.00 per dollar amid Central Bank of Nigeria’s weekly injections of $210 million.
Of the sum injected, $100 million was allocated to Wholesale Secondary Market Intervention Sales (SMIS), $55 million was allocated to Small and Medium Scale Enterprises and $55 million was sold for Invisibles.
Meanwhile, the FX rate appreciated for most of the foreign exchange forward contracts. Specifically, 1 month, 2 months and 12 months contracts gained 0.01%, 0.02% and 0.13% to close at N418.13/$, N420.99/$ and N448.18/$ respectively, according to a note from Cowry Asset Limited
However, 3 months, 6 months contracts lost 0.02% each to close at N424.08 and N433.03 per US dollar respectively.
“We expect some level of pressure on the Naira against the United States dollar as investors convert their assets to dollar-denominated assets amid heightened uncertainty”, Cowry Asset Management said. #Naira Falls as Election Uncertainties Begin to Gather Momentum.