The Naira remained under pressure and fell across the foreign exchange (forex) markets as skepticism continued to fuel foreign inflows into the market.
Official data and trading reports by finance houses indicated that naira depreciated at both the official Investors and Exporters (I & E) window and the parallel market.
At the official I & E window, the naira depreciated by 0.07 per cent to N416.63 per dollar. At the parallel market, where most manufacturers and private retail users source forex, the naira fell by 0.20 per cent to N588 per dollar at the weekend.
However, at the Interbank Foreign Exchange market, the naira closed flat at N430 per dollar amid Central Bank of Nigeria (CBN)`s weekly injections of $210 million.
The apex bank, as usual, allocated $100 million to Wholesale Secondary Market Intervention Sales (SMIS) and $55 million each to Small and Medium Scale Enterprises and invisibles.
Most analysts expected further devaluation in the value of naira, despite the apex bank`s efforts to moderate the exchange rate.
Analysts at FSDH said they expected the official exchange rate to depreciate to N430 per dollar this year.
Analysts at Cowry Asset Management said there would be some level of pressure on the naira against the dollar as investors convert their assets to dollar-denominated assets amid heightened uncertainty.
Cordros Capital stated that further adjustments in the naira/dollar peg closer to its fair value and flexibility in the exchange rate would be significant in attracting much needed foreign inflows that could help bolster the domestic currency.
A two-week review by Bismarck Rewane’s Financial Derivatives Company (FDC) on the weekend shows that the parallel market naira plunged to N600 per dollar and then recovered slightly to trade at N586 per dollar by March 29, 2022.
FDC said FX demand continues to outpace supply, despite rising global oil prices, at around $ 114.38 per barrel. Average daily forex trading volume increased 9.17 percent from $ 119.36 million in the first half of last year to $ 130.3 million.
Foreign exchange reserves increased 0.03 percent to $ 39.53 billion after a steady decline from March 16th to 23rd. Import coverage fell 0.44 percent from 9.01 at the start of the period to 8.97 months.
“We expect currency pressures to continue due to weak FX inflows due to lower oil production. Parallel market interest rates may continue to fall until supply increases and market fundamentals change.” Said FDC.