Naira Gained N0.08 against the Dollar at the I&E Window Despite Fx Rationing by Banks…

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At the close of the week, we saw the local currency experience a slight calm in demand in the foreign exchange market following announcements by deposit money banks on the amount of permissible dollar purchases from banks and its availability for BTA and PTA purposes.

Consequently, the Naira edged the dollar by N0.08 (0.02%) week on week at the importers and exporters window to N445.67/USD from N445.75/USD it closed the previous week as FX users continue prowling for FX at the open market whose rates are determined by the forces of demand.

Furthermore, at the the open parallel market FX window the Naira lost N59 or 8.14% week on week to close the week at N784/USD from N725/USD in the previous week’s close as we begin to approach festivities coupled with the reason by users to hedge against the weakening naira whose purchasing power has also been eroded by the spiralling inflationary levels.

Thus, market participants maintained bids between N444/USD and N452/USD at the I&E segment while at the open market, bids ranged between N760/USD and N788/USD.

At the Interbank Foreign Exchange Forward Contracts market, the spot exchange rate remained unchained from the previous week as it closed the week at N445/USD from last week.

Further afield, our analysis of the Naira/USD exchange rate in the Naira FX Forward Contracts Markets, there was a mixed trend across tenors as we saw the 1 month, 2 month and 3 month contracts all gaining by 0.4%, 0.21% and 0.75% week on week to close the week at a stronger offer contact price of N449.28/USD, N452.67/USD and N457.27/USD in that order.

On the flip side, the 6 month and 12 month forward contracts saw the naira edged out by the dollar strength by 2bps and 18bps from which they were priced at N477.02/USD and N504.37/USD respectively.

Elsewhere, the Bonny light crude price inched higher marginally by $0.08 (0.08%) w/w to close the week at USD90.39 per barrel (as at November 17) from USD96.21 per barrel in the previous week.

This is emanating from the fact that a weakening demand outlook looks to have overshadowed the supply side of the equation. Nevertheless, energy investors have continued to stay cautious about a highly indeterminate supply outlook heading into wintertime while OPEC is expected to keep oil markets tight.

In the coming week, we anticipate the cool calm to continue across all segments of the FX market barring any distortion in the market and as the apex bank continues its weekly market intervention in the secondary market to shore up the naira.

However, the news around banks rationing FX for BTA and PTA purposes may likely bring about pressure on the local currency as users will flood the open market, sourcing for the greenback.