Naira appreciates across markets amid increase in foreign exchange transactions
The naira, on Friday, November 18, appreciated across the foreign exchange (FX) markets.
The appreciation in the value of the naira happened amid a slight increase in FX transactions at the investors and exporter (I & E) window.
At the investors’ window, the naira appreciated by 0.21 percent as the dollar was quoted at N445.75 on Friday, as against N446.67 which was recorded a week ago.
This development also came few days after commercial banks in the country released fresh updates on sales of foreign currencies to their customers.
However, the demand slightly decreased at the Nigerian Autonomous Foreign Exchange Fixing (NAFEX) window as the exchange rate crossed N460.
The scarcity of foreign exchange has worsened the naira exchange rate in the official and unofficial markets, and things may get worse ahead of the 2023 general election.
Apart from that, historical data indicates that the exchange rate often gets worse in the latter part of the year due to higher demand for imports while there is often less than nothing to export apart from crude oil.
It is unlikely for the naira to win an exchange rate battle with currencies of productive economies even with the multi-tiered exchange rate system.
Last week, the International Monetary Fund (IMF), in a report, said that a unified and market-clearing exchange rate remains critical to enhancing confidence.
It noted that continued FX shortages, a stabilized exchange rate regime, rising inflation, limited debt servicing capacity, and administrative restrictions on current transactions can fuel devaluation speculations.
“These factors hinder much needed capital inflows, encourage outflows and constrain private sector investment”, IMF added.
Also, it said that the Central Bank of Nigeria (CBN) should step back from its role as the main FX intermediator, limiting interventions to improving the market volatility and allowing commercial banks to freely determine FX buy-sell rates.
In the black market, there was a relatively low heat-up after the previous spurious demand for the greenback that greeted the naira redesign announcement.
Recall that the CBN, on October 27, said that it will redesign some naira notes and begin its circulation from December 15, 2022.
The CBN governor, Godwin Emefiele, while making this known at a press conference stated that the new notes include N200, N500 and N1000.
Emefiele also advised Nigerians to take old naira notes to banks in exchange for the new notes, adding that that the existing naira notes would seize to be regarded as legal tender by January 31, 2023.
Consequently, a number of deposit money banks (DMBs) released updates on the amount of permissible dollar purchases for business/personal travel allowances.
Still, Broadstreet FX analysts have not changed their view on the local currency.
At the Interbank Foreign Exchange Forward Contracts (IFEFC) market, the spot exchange rate remained unchained from the previous week as it closed the week at N445 from last week.
In addition, analysts at Cowry Asset anticipate the cool calm to continue across all segments of the FX market barring any distortion in the market.
