The naira that stabilised around N304/$ last week is expected to be pressured further as a result of rising increase in demand for the greenback. This is in spite of the Central Bank of Nigeria’s (CBN) intervention worth $7.9 million sales at the interbank foreign exchange market.
The naira on Friday fell to a record low of N328.90k against the dollar. This represents 7.92 percent compared with N304.75k it closes the previous day at the interbank spot market.
The apex bank intervened with weekly dollar sales worth $7.5 million. It also attempted to reduce the manufacturing sector’s backlog of foreign exchange demand by selling 60-day forwards contracts worth $330.09 million.
But these efforts could not help shore up the naira on Friday.
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“We anticipate sustained pressure at the alternative market segments in the absence of boost in foreign exchange supply,” analysts at Cowry Asset Management said.
The naira weakened against the greenback at the interbank market but closed flat on week-on-week basis at the parallel segment.
At the interbank market, the local unit weakened to N308.81/$ at the start of the week (from N304.5/$ on Friday) before making a comeback on Tuesday, appreciating to N304.75/$ and remained stable till Friday when it dropped to N328/$, implying a 7.1 percent week-on-week depreciation.
The parallel market was relatively stable, trading within a band of N465/$ – N470/$. The naira appreciated N5 on Tuesday to N465/$, but weakened on Wednesday to settle at N470/$.
In the Futures market, the value of open contracts stood at $3.6 billion (from the previous value of $3.5bn recorded last Friday).
During the week, the 20 SEP 2017 instrument witnessed increased subscription with an addition of $85.7 million.
The 26 APRIL 2017 instrument remains the most subscribed with a value of $794.4 million, while the recently listed 27 OCT 2017 contract is the least subscribed at $26.7 million.
Analysts at Afrinvest Securities Limited said, “In the interim, we expect the exchange rate at the parallel market to remain pressured due to restricted access to official windows and surge in dollar demand associated with the festive season.
The CBN is yet to guide to a metric that would trigger a shift from its current peg; thus, we expect foreign exchange rate at the official market to remain stable while the CBN intervenes via spot/forward sales of the greenback”.
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