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The Nigerian local currency has experienced a surge in the foreign exchange market at the beginning of this week, driven by the announcement of additional repayment of FX backlog by the apex bank.
Data sourced from FMDQ indicates that the Naira appreciated by 1.47%, closing at N856.57 against the US dollar. In the parallel market, the Naira concluded at N1,238 per dollar.
Remarkably, the strengthening of the local currency has occurred despite the Central Bank of Nigeria’s (CBN) absence in forex market interventions for the past three months.
The CBN revealed that it has remitted $61 million to foreign airlines, along with an additional payment of over $2 billion in FX backlog transmitted to some deposit money banks.
Nigeria’s Naira has been under pressure due to low FX inflows amid increasing import demand from manufacturers, invisible FX users, and other entities involved in the importation category.
Last week, the exchange rate at the Nigeria Autonomous Foreign Exchange Market (NAFEM) fluctuated within the range of N700 to N1,268 per USD but closed at N869.39 on Friday.
In the parallel market, the Naira closed at an average of N1,230 on Friday, resulting in an FX spread of 41.5% as the official rate appreciated.
According to FMDQ data, the volume of US dollars traded at the autonomous FX window decreased by -26.0%, totaling -USD107.1 million last week, with a recorded inflow of USD15.3 million in the NAFEM window, as reported by Coronation Research. Analysts note that for the eleventh consecutive week, no injections were made by the CBN.
Foreign portfolio investors (FPIs) constituted 38.7%, non-bank corporates made up 33.7%, exporters accounted for 7.4%, and others contributed 20.2% to the market activities, according to the data.
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