The naira traded largely unchanged across official and parallel foreign exchange markets on Monday, even as weekly foreign exchange inflows dropped by 15.7 percent, reflecting tighter liquidity and declining supply from foreign investors.
According to recent Central Bank of Nigeria (CBN) statistics, the local currency fell somewhat by 72 kobo to finish at N1,437.29 per dollar on Monday as against N1,436.57 recorded last Friday at the Nigerian Foreign Exchange Market (NFEM).
Due to decreased trade activity and inflows, the naira dropped to N1,460 per dollar in the parallel market, down from N1,455 earlier.
Total FX inflows via the NFEM fell to $899.2 million from $1.04 billion the week before, according to a market update from Coronation Merchant Bank. Foreign investors’ and non-bank companies’ lower participation was blamed for the decline.
With 60.13 percent (almost $540.7 million), foreign portfolio investors (FPIs) continued as the major donors. Corporate entities followed them at 13.99 percent, individuals at 12.75 percent, and exporters at 12.56 percent.
The News Chronicle gathered that this slowdown in inflows coincided with the naira ending its two-week appreciation streak, depreciating by 1.03 percent week-on-week at the official window and 1.71 percent in the parallel market.
The gap between both markets widened to N28.42 per dollar, highlighting growing liquidity strains.
Backed by inflows of $899.2 million against lesser outflows of $822.6 million, Nigeria’s external reserves, however, showed a modest rise of 0.29 percent to $43.32 billion as of October 6.
Driven by strong portfolio inflows and better liquidity, Coronation Bank analysts voiced restrained hope that the naira would remain under N1,500 in the near term.
They stressed, however, that ongoing changes by the CBN, strong investor involvement, and rising outside reserves in light of world events will be vital for sustained stability.
Market watchers expect upcoming Eurobond proceeds and seasonal remittances to bolster supply and ease short-term pressure on the local currency.
