Naira Lost Strength Against The Greenback Across FX Segments on Buy Pressure, Scarcity…

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The just concluded week saw the Naira depreciate 0.4% week on week to N436.33/USD from N434.75/USD at the Investors and Exporters’ FX segment stemming from pressures from low crude oil earnings for Nigeria despite the Brent Crude trading at a level above the 2022 budget benchmark.

Similarly, panic buying in the market resulting from the news that some foreign airlines plan to sell flight tickets in foreign currencies, drove many FX users to begin a prowl for the greenback for personal and business travels while the apex bank’s interventions in the FX space has always seen the street traders being ignored with funding.

Thus, market participants maintained bids between N424/USD and N437/USD.

At the parallel market, the Naira further depreciated by N6 (0.9%) week on week to close at N708/USD from N702/USD as continued demand pressure stay unabated for another week in the face of declining reserves and low earnings from oil exports.

The Interbank Foreign Exchange market traded in the mixed bag as the NGN/USD closed flat at N430.00/USD amid CBN’s weekly injections of over USD250 million into the FX market to cushion the Naira from free fall.

In the meantime, the Naira/USD exchange rate in the Naira FX Forward Contracts Markets inched higher across the long tenor contracts tenors as we saw the 6 months and 12 months contracts close the week in the positive region and appreciate 0.09% and 0.29% to N452.19/USD and N476.36/USD from N452.58/USD and N477.74/USD respectively.

On the contrary, the 1M, 2M, and 3M tenors all depreciated by 32bps, 3bps, and 2bps respectively to close the week’s offering at N435.83/USD, N437.82/USD, and N440.30/USD in that order.

Elsewhere, the Bonny light crude price depreciated by $6.01 (-6.34%) w/w to close the week at USD91.78 per barrel from USD97.79 per barrel in the previous week on the low demand for the Nigerian benchmark crude oil

Next week, we expect the Naira to depreciate further across all segments of the FX market as a result of growing dollar demand pressure