Naira Rises Despite FX Market Liquidity Decline.
Naira Gains Despite Declining Market Liquidity
On Monday, the official foreign exchange (FX) market saw the naira gain N88.35 versus the US dollar. The local currency rose 5.7% in value, solidifying its position in the foreign exchange market, despite a notable decline in liquidity.
The Naira Gains Value in Relation to the Dollar
The naira finished at N1,552.92 per dollar, up from N1,641.27 on Friday at the Nigerian Autonomous Foreign Exchange Market (NAFEM), according to statistics from the FMDQ Securities Exchange Limited. Given that the market turnover, or total amount of currency moved, decreased by 44.27%, with transactions totaling $343.71 million on Monday compared to $616.73 million on Friday, this appreciation is a welcome surprise.
Intraday Variations in Rates
There was some volatility in the intraday exchange rate, which ended the day somewhat lower at N1,682 than it had on Friday at N1,675. But at the conclusion of last week, the intraday low rate increased from N1,591 to N1,540. Despite the naira’s general upward trend, these swings point to short-term instability in the FX market.
Official Market Gap and Parallel Market
In the black market, or parallel market, the naira held steady at N1,700, indicating a difference between official and unofficial pricing. Higher demand for the dollar outside of the regulated FX channels is indicated by the rate on the parallel market. This assessment is supported by data from street vendors and internet platforms.
Market Trends and Past Performance
It has been a turbulent year for the naira. According to a report by Coronation Asset Management, the NAFEM rate closed at N1,641.27 per dollar, down 0.61% over the previous week after dropping 5.54% the week before. As of Monday, the naira had lost 44.73% of its value this year, falling 4.39% short of the total amount of depreciation it experienced in 2023.
Central Bank and Reserve Actions
The Central Bank of Nigeria (CBN) announced a minor rise in foreign exchange reserves in spite of these changes. The reserves ended the week at $38.67 billion, up $62.58 million, or 0.16%. The CBN may have more freedom to intervene in the foreign exchange market if necessary thanks to this increase.
Effects on Companies and Customers
Both consumers and businesses face difficulties as a result of the ongoing discrepancy between official and black market rates. Inflationary pressures result from importers’ and those looking to get foreign exchange for business activities’ inability to forecast expenses. It is anticipated that additional actions may be required to stabilize the naira as the government and CBN continue to keep an eye on the foreign exchange market.
Reactions on Social Media
“The naira is increasing in the official market, but there isn’t much of a shift in the streets,” said @Oluwatobi88. #FXMarket.
@IfeanyiTrade: “What causes the naira to consistently appreciate during periods of limited liquidity? Something is off. The Nigerian economy.
@MariamJ: “I hope that regular prices will reflect the naira’s recent surge. We are still being killed by inflation. “#NairaStruggles”
@RealSeyiO: “The official market is seeing an increase in naira, but the street price is still N1,700. Where is the actual advancement? “#FXMarketUpdate”
@HabibLawal: “Will the CBN’s expanding reserves and the strengthening naira continue? Finance in Nigeria.
@Ngozi_Economist: “This increase in the value of the naira seems fleeting. For long-term growth, structural improvements are required. “#NigeriaFX”
@DavidAdefemi: “Today’s naira news is good, but remember that the parallel market still has a lot of power. #ForexNigeria.
@FatimaAli: “The official rates are at least showing some improvement. Let’s address inflation now. “#NairaGains”
@JideForex: “What is causing this appreciation of the naira? Low demand or supply side? “#NairaWatch”
@Sarah_News: “At last, some good news regarding the naira! Will this, however, result in actual financial relief? “#EconomyTalk”
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