The foreign exchange market ended trading week on Friday with Nigeria’s currency falling to its lowest against the dollar in seven months on the parallel market.
Naira fell to N502 to the dollar on Friday, the lowest since November 30, 2020 when it weakened to as low as N510/$ on the black market.
The naira depreciation was as a result of speculation as speculators took advantage of the Central Bank of Nigeria’s recently adopted exchange rate to buy up and hoard dollars.
After trading on Friday, naira lost 1.41 percent to the dollar, closing at N502 compared with the opening rate of N495 on Monday.
Week-on-week, naira appreciated by 0.43 percentage points to 1.41 percent from 1.85 percent it closed the previous week on the black market.
Naira has been on a steady depreciation since this week. Day-on-day, naira weakened by N1.00k against the dollar on Tuesday as it closed at N496, from N495 on Monday. It also lost N2.00k to the dollar on Wednesday when it closed at N498 from N496 on Tuesday. The local currency further weakened by N1.00k against the dollar on Thursday to N499/$ as against N498 on Wednesday on the black market.
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At the Bureau De Change (BDC) segment of the foreign exchange market, naira still maintained a stable rate of N495 since the opening of the week on Monday.
Aminu Gwadabe, president, Association of Bureaux De Change Operators of Nigeria (ABCON), advised members of the public to always patronise CBN-licensed BDCs which are regulatory-compliant and operate within international best practices.
He said that parallel market activities have for years become major drivers of the exchange rates and control over such transactions have become burdensome.
He said that forex speculators are capitalizing on the state of the foreign exchange market and the naira to sell dollars above CBN-approved margin.
There was some level of stability at the Investors and Exporters (I&E) forex window as the nation’s currency appreciated by 0.30 percent at the end of the trading week on Friday.
Naira closed at N410.75k on Friday compared to the opening rate of N412.00k/$ on Monday, data compiled by BusinessDay from the FMDQ showed.
On a week-on-week basis, naira lost 0.48 percentage points to 0.30 percent from 0.18 percent closed the previous week.
The foreign exchange turnover increased by 84.09 percent to $230.93 million on Friday from $125.44 million recorded on Monday. The FX turnover rose by 83.34 percentage points from 0.75 percent the previous week to 84.09 percent this week.
Nigeria’s external reserves fell 0.1 percent week-on-week ($48.8m) to $34.2bn as at June 1, 2021 from $34.3bn last week.
This week, Brent crude oil price surged past the $70bbl mark, gaining 2.9 percent w/w to $71.77bbl as the slow pace of talks on the Iranian nuclear deal agreement signalled a delay in the legitimate return of Iranian oil into the market. Meanwhile, the OPEC+ reiterated its plan to ease production cuts by 840,000bpd in July in response to the strong demand outlook for oil due to the re-opening of economies in the US and Europe, according to a report by Afrinvest Securities Limited.
At the FMDQ Securities Exchange (SE) FX Futures Contract Market, the total value of open contracts settled at $4.3bn, up by 7.7 percent ($303.4m) from the prior week.
This was due to the new subscription in the MAY 2022 (contract price: N436.48) and JUN 2022 (contract price: N439.13) instruments. The MAY 2022 instrument (contract price: N436.48) received the most buying interest in the week with additional subscription of $299.4m (up by 684.3 percent w/w) which took the total value to $343.1m.
However, the JUN 2022 instrument (contract price: N439.13) was the least subscribed, with an additional subscription of $4.0m (up by 11.8 percent w/w) for a total value of $38.1m while the other instruments under remained flat for the week.
“In the coming week, we expect rates to continue to trade within similar band across different FX segments of the market,” said analysts at Afrinvest.
