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The Nigerian naira witnessed divergent exchange rates following a surge in its recovery after the apex bank’s settlement of the FX backlog. Despite reaching N809.02, demand and supply imbalances impacted the official market exchange rate.
Data from FMDQ revealed a 4.24% depreciation, with the naira closing at N809.02 to the dollar in the official market, compared to the previous rate of N776.14. Speculators are now closely monitoring market trends as the exchange rate gap moderates.
While the Central Bank of Nigeria takes visible actions to bolster the naira, managing the supply side effectively becomes crucial to prevent any relapse from the recovery line. Despite FX backlog payments, analysts emphasize the need to maintain positive market sentiment.
In the parallel market, the naira’s performance strengthened, closing at N1,000 per dollar on Monday, compared to the previous N1,030. Although the open market has partially returned to normalcy, the local currency continues to consolidate its recent improvement from a record low of N1,310, driven by excess demand on the official market flowing to the unofficial market.
Last week, the Central Bank initiated the clearance of outstanding foreign currency forwards owed to banks, addressing the approximately $7 billion FX backlog. The naira, under pressure from past due obligations, awaits sustained positive market sentiment.
To alleviate demand pressures in the parallel market, the Central Bank removed restrictions on 43 items accessing FX from the official window. Nigeria anticipates $10 billion in foreign currency inflows in the coming weeks to enhance liquidity, as stated by the finance minister.
In global markets, the US dollar experienced a decline against major trading partners early Monday, except for a marginal increase against the yen. The focus this week shifts to appearances by Federal Reserve officials amid a relatively quiet data schedule.
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