Naira Skids to N446.50 on Demand Pressure, Dollar Stashing for Festive Spendings…

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In the just concluded week, we saw the Naira experience another calm in demand in the foreign exchange market as Bureau De Change operators cut rates in a bid to attract users of the greenback just as we inch closer to the official date of the release of the redesigned Naira notes by the CBN.

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Consequently, at the investors and exporters’ FX window the Naira skid by N1.17 or 0.3% week on week to close the week at N446.50/USD from N445.33/USD in the previous week’s close as currency users renew their demand ahead of the festivities.

Conversely, the exchange rate between the Naira and dollar stayed flat from the previous week’s close at the importers and exporters window to close the week at N747/USD as traders wait on the sidelines on the next move following CBN’s policy on naira withdrawal limit during the week.

Thus, market participants maintained bids between N444/USD and N450/USD at the I&E segment while at the open market, bids ranged between N740/USD and N753/USD.

A look at activities 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.

Also, our analysis of the Naira/USD exchange rate in the Naira FX Forward Contracts Markets, there was a bullish trend across tenors for the Naira Forward Contracts against the greenback as we saw appreciation of value in the Naira index across all tenors by 2bps, 13ps, 36bps, 40bps and 82bps week on week to close the week at offer prices of N460.02/USD, N465.58/USD, N469.86/USD, N489.33/USD and N521.44/USD in that order.

Elsewhere, the oil market was looking in the bears during the week as the Bonny light crude price dipped by 14.1% or (USD12.32) week on week to close the week at USD75.08 per barrel as at December 08,) from USD87.40 per barrel in the previous week on concerns that the demand for oil would get dampened by the impending global economic slowdown.

Overall, oil traders are beginning to point fingers on this week’s sell-offs which was partly on the rise in gasoline stockpiles in the U.S and the news that OPEC+ has rsolved to keep ouput steady.

Just as was witnessed in the last week, we expect the niara to trade relatively calm across all FX segments as the date for new banknotes rollouts draws closer and barring any distortion in the market.

However, the recent policy from the apex bank on the daily and weekly withdrawal limits may drive further demand for the greenback as hedge against further depreciation of the local currency.

In our opinion, the jury is out to watch as we begin to see the multiplier effect of the policy across facets of the economy.

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