The naira continued its decline against the US dollar in various foreign exchange (FX) markets, due to inadequate intervention by the Central Bank of Nigeria (CBN).
Setbacks occurred in both the official and unofficial markets, and problems with liquidity fuelled rising volatility. The official market saw the naira settle at N1,687.52 per US dollar, down 0.51% from Tuesday’s rate of N1,678.93 per dollar, according to statistics from the FMDQ platform.
Despite the naira’s depreciation, total daily turnover in the FX market rose to $173.29 million on Wednesday, up from $128.59 million on the previous trading day. At the Investors and Exporters (I&E) window, the naira fluctuated between N1,705 and N1,601.50 per dollar.
Unstable Exchange Rates Persist
The naira’s performance at the autonomous FX market has remained unstable, with limited impact from the CBN’s dollar sales. Efforts by the CBN to stabilize the currency following last year’s significant devaluation have not yielded the desired results. Predictions from Goldman Sachs and Fitch Ratings of a recovery to N1,000–N1,200 or N1,450, respectively, have yet to materialize.
The current spot rate is also far below Financial Derivative Company’s fair value estimate and Renaissance Capital’s optimistic projections for the year.
Analysts have highlighted the need for increased dollar sales to banks to stabilize the naira in the official market. One expert remarked, “The naira cannot survive a willing-buyer-willing-seller model without running into chaos due to limited FX inflows into the official market.”
Parallel Market and External Reserves
In the parallel market, the naira weakened further to N1,740 per dollar, driven by heightened seasonal demand, which exacerbated the imbalance between supply and demand. Despite these challenges, the CBN’s external reserves recorded an uptrend, reaching $40.288 billion.
Commodity Market Overview
Oil prices remained steady amid concerns that the Ukraine conflict could disrupt Russian oil supplies, offsetting reports of rising U.S. crude inventories. Brent crude held at $73.71 per barrel, while West Texas Intermediate (WTI) settled at $69.95 per barrel.
As demand for the safe-haven asset increased due to geopolitical tensions between Russia and Ukraine, gold prices increased for the third day in a row and reached a one-week high. The price of gold on the international commodities market was $2,646.79 per ounce on Wednesday.
